The Egyptian military’s decision earlier this month to devalue the Egyptian pound by a staggering 48 per cent has created major short-term challenges for the country’s exporters, precisely those the move was intended to help.
The aim of the devaluation was to support Egyptian exports and attract foreign investment, but the immediate impact has been to dramatically elevate costs.
“In theory, the devaluation should be very positive for exports, not just of food, but of all products,” said Amr El-Beltagy, product manager at exporter Belco. “However, that has not happened in Egypt.”
Instead, he revealed, costs have increased significantly. “Shipping costs have increased, whether seafreight or airfreight, since they are paid in dollars,” he said. “Pesticides and fertilisers, which are almost all imported, have seen prices increase by around 100 per cent. Costs of electricity and water are also up, while costs of construction materials such as iron, cement and wood have increased dramatically.”
This has caused major instability in terms of prices, according to El-Beltagy. “There are no stable prices at the moment,” he said. “Each day they change, as currencies fluctuate. Egyptian companies tend to rely on bank loans to fund operations, but interest rates have now increased to over 17 per cent.”
Despite the present challenges, El-Beltagy believes that the move to float the currency would produce positive results for the country in the medium- to long-term.