(Bloomberg) — In Egypt, consumer goods are becoming increasingly difficult to obtain as the country seeks to soften the impact of its currency across its dollar-starved $400 billion economy. From summer clothes to imported cars… are becoming commonplace. Fast fashion groups such as Mango, Zara and H&M have limited customer choice.
When it comes to imported food, some brands could be out of stock or harder to find, from breakfast cereals, potato chips and beef hot dogs to various pesto sauces and lasagna, according to shoppers contacted by Bloomberg. It is said that there is a sexuality.
This is a far-fetched surge in policies introduced half a year ago that have tightened scrutiny of imports and thus stifled demand for foreign currency. With a series of side effects spreading across Egypt, the government needed to take other steps to strengthen its finances and has consulted with the International Monetary Fund on a new program.
EGYPT INSIGHT: Devaluation Instead of Default to Close Funding Gap
Goldman Sachs Group needs to secure a $15 billion package from the IMF to meet Egypt’s funding requirements over the next three years despite government demands for less This is on top of more than $22 billion in deposits and investment pledges from Saudi Arabia, the United Arab Emirates and Qatar.
Goldman economist Farooq Sousa said, “The country is short on foreign currency. As evidence, he cited deteriorating lenders’ net foreign assets and declining central bank reserves.
Egypt, the most populous Arab country and one of the world’s largest importers of wheat, is one of the emerging economies vulnerable to the shock that tore commodity markets after Russia’s invasion of Ukraine. did. A wave of inflation and market turmoil unleashed by the war has contributed to the worst foreign exchange crunch since a dollar shortage five years ago caused the pound to devalue, ultimately leading to a $12 billion IMF loan. increase.And the gas converges in Egypt
However, the period of trying to curb imports earlier this year was a result of Egypt’s struggle to attract portfolio investors and enough long-term foreign capital when conflict in Europe was imminent. to the extent that it has endangered
Read more: World Bank outlines steps for Egypt to boost private investment
The entrenched current account deficit for more than a decade has contributed to the country’s reliance on volatile inflows into domestic securities to cover chronic shortfalls.
Foreign direct investment, long touted as a priority by the authorities, has stalled after a brief recovery. Egypt’s policy kept the pound largely stable after the 2016 devaluation until the central bank allowed its sharp depreciation in March. The pound fell below $19 to the dollar for the first time since January 2017 in offshore markets on Tuesday, according to data compiled by Bloomberg. about 23%
The government said in May that foreign investors had withdrawn about $20 billion from the local bond market since the beginning of the year. Central bank net reserves, which have been rising since mid-2020, have fallen in three of the past four months.
To cool demand for the dollar, Egypt has pursued an approach that is now causing supply shortages in some products. Starting in February, authorities began requiring importers to secure so-called letters of credit from banks so that they can buy goods abroad.
Imports plummeted from a total of about $25 million per month to about $1 million in the four months after the new rules were introduced, said an official at a major Egyptian distributor of foreign consumer goods. All of the company’s imports are out of stock, said a person familiar with the matter, who requested anonymity.
The plight of another Egyptian company that imports cars is even worse. Since the end of March, it has not received a single approval to ship a vehicle from abroad, according to company officials.READ MORE: Egyptian FX Market Needed a Correction: CBE Governor
The new rules exempted many essential products, from pharmaceuticals to some food products, and applied only to transactions over $5,000, but the new procedures are more complicated than before, raise costs, and cost businesses less money. A delay has occurred.
Declining import approvals eventually prompted President Abdel Fattah El-Sisi to issue additional exemptions for raw materials and intermediate products, partly in an attempt to stimulate local production. , dollars were released for those goods.
Individual account holders can also usually buy foreign currency from banks for their planned trips, although restrictions have been eased since March. There are no strict restrictions on credit card transactions abroad.
Read more: Egypt’s Maait says it’s time to rethink reliance on carry trade
Carla Slim, an economist at Standard Chartered, said Egypt’s currency controls are likely to be a key focus of talks with the IMF.
Washington-based lenders are “most likely to make exchange rate flexibility a priority,” she said. I’m looking for
Egypt will likely be days, if not weeks, from trading with the fund, and consumers will have to get through it somehow.
“When I went out to buy summer clothes for my children, most stores had very basic items and a variety of winter clothes,” said Umm Laila.
A mother of three, who asked not to give her full name for security reasons, said a salesperson at a store in a shopping mall in Cairo blamed the store for running out of winter clothing. said he told her she had to fill the void with
“I couldn’t believe my eyes,” she said.
©2022 Bloomberg LP
