Excerpts:Egyptian depression most severe since 1930s 17 May 2013

+++SOURCE: Egypt Daily News 17 May’13:”Egypt 'suffering worst economic
crisis since 1930s' “

SUBJECT: Egypt’s severest depression since 1930s

QUOTE:” effect on Egypt's poorest, the country's current economic
predicament is at its most dire since the 1930s, Galal Amin, professor of
economics at the American University in Cairo, and Samir Radwan, finance
minister in the months after Egypt's 2011 uprising, said in separate
interviews with the Guardian.”

FULL TEXT:Since the fall of Hosni Mubarak in 2011, Egypt has experienced a
drastic fall in both foreign investment and tourism revenues, followed by a
60% drop in foreign exchange reserves, a 3% drop in growth, and a rapid
devaluation of the Egyptian pound. All this has led to mushrooming food
prices, ballooning unemployment and a shortage of fuel and cooking gas –
causing Egypt's worst crisis, said Amin, "without fear of making a mistake,
since the 30s".

"Nobody cares about the poor now," Amin said. During comparable crises in
the late 1960s, the mid-70s and the late 80s, Amin and Radwan argued that
Egypt's poorest were variously shielded from absolute hardship either by
state subsidies, overseas aid, comparatively low unemployment, or by
remittances from expatriates in the Gulf states. But now one in four young
Egyptians is unemployed, household remittances are low, and there is a
shortage of subsidised goods.

"You are talking about nearly half of the population being in a state of
poverty," said Radwan, a development economist. "Either in absolute poverty
or near-poor, meaning that with any [economic] shock, like with inflation,
they will fall under the poverty line." Currently, 25.2% of Egyptians are
below the poverty line, with 23.7% hovering just above it, according to
figures supplied by the Egyptian government.

For most Egyptians, rising food prices are the most critical problem. Some
goods have doubled in price since last autumn – catastrophic for the quarter
of families that already spend 50% of their income on food.

For Hoda Goma, a Cairo architect, the situation is having a serious effect
on her two eight-year-old sons. "They're getting worse at school," she said.
"They're getting ill more often. They have these black patches under their
eyes and their teeth have got worse."It is down to their diet, Goma
explained. She cannot afford to feed them what they need. Six months ago she
spent half her salary on food. Now she says it is closer to four-fifths –
not because she is earning less, but because rising food prices show no sign
of slowing down.

"Prices are on fire," said grocer Walid Ali. Just last week, Ali would buy a
kilo of mandarins for four Egyptian pounds – or 40 British pence – from
wholesalers, and sell them for six (60 British pence). "Now I buy them for
six and sell them for eight."

As a result, consumers are either buying less, or not buying at all. "It's
impossible," said Ali. "I've lost half my customers. People can only afford
to buy basic foods." At his two-storey market in central Cairo, the top
floor is now entirely empty. Neighbours said all stall-holders on the upper
level had been forced to close in recent months.

Inflated food prices are not a new phenomenon in a country that is the
world's biggest importer of wheat, where the population has long risen more
rapidly than production, and where up to half of the produce rots in the
heat on the way to market. But the recent rate of inflation has been
significantly raised by Egypt's disastrous economic predicament.

Most problematically, the value of the Egyptian pound has fallen by 12%
against the dollar since December. For two years, Egypt's central bank had
used its foreign currency reserves to arrest the slide – but with those
reserves having shrunk by around 60% since 2011, the bank had to abandon the
tactic last winter. As a result, the pound's value has this year fallen
further and faster. In turn, it has become much more expensive to import
foreign goods – catastrophic for a country that buys in 60% of its wheat,
and whose farmers also often rely on imported fertiliser, fuel and animal
feed.

"They have a serious crisis on their hands," said the EU's envoy to Egypt,
James Moran, who noted that Egypt's foreign reserves had fallen from $36bn
(£24bn) three years ago to $14.4bn last month. "This gives you less than
three months' import coverage – and in an import-dependent economy, this is
quite dangerous."

"We are suffering," said Ali Eissa, the chairman of Nahdet Misr, a farm
company which grows potatoes and oranges on 3,000 acres across Egypt. "It's
impacted most of our fertilisers, machines, tractors – all their prices have
dramatically increased."

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Sue Lerner - Associate, IMRA