High-street retailers like Starbucks and The Body Shop are feeling the pinch of Egypt’s economic turmoil as analysts wonder how the most populous country in the Arab world will pay back its spiraling debt.
The US dollar has become scarce in the midst of a serious foreign exchange crisis, as the Egyptian pound is falling and inflation is rising at a rate of 35 percent.
A string of recent shocks have severely damaged Egypt’s heavily import-dependent economy, which is controlled by businesses with ties to the military and has a penchant for massive infrastructure projects.
The pandemic impacted its key tourism sector. The Ukraine war raised the cost of wheat and other imports. And recent attacks by Yemen’s Huthi rebels on Red Sea shipping have slashed vital Suez Canal fees.
According to figures from the Central Bank of Egypt, remittances from overseas Egyptian workers—the primary source of foreign currency—dropped by as much as 30% in just July–September 2023.
The Egyptian government has found it difficult to pay off its mounting debt as a result of years of excessive borrowing, which included the construction of a new capital city in the desert east of Cairo.
With a $3 billion credit facility, the International Monetary Fund intervened, but it also requested harsh austerity measures in the 106 million-person nation, where two thirds are living on or below the poverty line.
“We provide services to the Egyptian people in Egyptian pounds and have to pay for them in dollars,” he said in a speech.
