An early Halloween to remember in Egypt: Egyptian Pound devalued as Egypt reaches an agreement on IMF loan

It was expected again but the question was when.

Some said that it would be after the COP27 which is to be held in Sharm El-Sheikh after a couple of weeks while others said it would be after that call of protests by Pro-Muslim Brotherhood groups on 11/11 which everyone expects to be a failure.

I knew it was a matter of days when Prime Minister Mostafa Madbouly announced on Wednesday that that batch of decisions included raising public sector employees’ minimum wages and maintaining electricity prices through June 2023.

But it would not be in October because it was the time of the upcoming scheduled Monetary Policy Committee “MPC” meeting

It did not pass 24 hours when we found out the Central Bank of Egypt’s Monetary Policy Committee held an emergency meeting early Thursday morning to raise the key interest rates by two per cent (200 bps) to reach 13.25 %, 14.25%, 13.75%, and 13.57 % for the overnight deposit rate, the overnight lending rate, the rate of the main operation, and the discount rate, respectively.

Egypt's Central Bank in Downtown Cairo 

Following that decision, the Egyptian pound began its depreciation trip between 13.5% and 15% to record a low of 23.09 against the US dollar. “It lost about 16.3%”

In a couple of hours, the announcement came officially from Cairo: Egypt reached a 46-month staff-level agreement with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) with a loan worth about USD 3 billion.

In a press conference by PM Madbouly, it was announced that the IMF’s US $3 billion loan is a part of a US $9 billion finance scheme that is expected to include one billion dollars from the sustainability fund and the US $5 billion from the country’s development partners.

Devaluing the Egyptian pound against the price of the US dollar was among the main issues if it were not the main issue standing against getting that IMF loan this time.

That is the second depreciation of the Egyptian pound this year after the first one in March, on Mother’s Day.

According to some calculations, I read online a couple of hours ago, the Egyptian pound lost about 49% of its value that we know in Egypt. I am speaking about the estimations of the foreign experts about how it was overvalued.

Another popular post that has gone viral in the past few hours on Facebook and Twitter in Egypt

The minimum limit of wages in Egypt in the public sector on 26 October 2022 was LE 2,700 = US $ 138

The minimum limit of wages in Egypt in the public sector on 27 October 2022 was LE 3,000= US $133

Let that sink in literality !!

Here I will copy what I had written in March again

I am not an economist or claim to be one but according to what I have studied in business administration as well as what I know from history, there is no end to this crisis if our local manufactured exports continue to be less than our imports and we borrow endlessly from aboard to spend on unproductive vanity projects.

It is not only the Russian invasion of Ukraine. The Russian invasion of Ukraine and its economic repercussions were the last straw that made the economy suddenly crumble like that. We will not get over those crises if we continue to put the blame on external factors alone.

Unfortunately, this is another blow to the Middle class which is already on the verge of extinction in Egypt.

The Russian invasion of Ukraine exposed a very weak sick economy the way I see it.

We borrow from IMF and World Bank as well as other organizations and countries to pay the interest of other past loans and it is like an unbreakable cycle that needs to be broken.

Egypt has become like those imprisoned women debtors from the countryside who are sentenced to prison because those debts result from buying things they do not need or can afford as part of their daughters’ wedding supplies so they won’t look poor in front of neighbours!!

It won’t be an easy ride; it is the hardest so far and I am praying that we can pass that time with the least losses inshallah. All that I think about is the sick especially those with chronic diseases and diseases like Cancer that need a huge sum of money.

All that I think about is that Egypt’s Middle class went down ago and the working class seems to be in the abyss currently and this is dangerous.

I do not know but something is expected a Pakistani scenario for Egypt after an Algerian scenario for Egypt and all that I see now is a mix of Argentinian Lebanese scenarios for Egypt.

It is scary either way.

Too scary than all those Halloween legends and stories. We had a very scary Halloween story about economic debts in the mid-19^th century that became a cautionary tale for generations like any Halloween story, but do you know those boys who love meddling in one haunting house to find some cursed book that they should not read, and they do, and they end up holding some damned black mass to bring a curse on the whole town? It is something like that.

FYI, I remember now that the Parliament did not have a say about loans with the IMF again as far as I remember.