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No chicken, no cafes: Egyptians scrimp as prices leap

In this Friday, Nov. 25, 2016, Egyptians shop at a popular market in Cairo, Egypt. Struggling to cope with price increases, some Egyptians are scrimping on meals, buying used clothes or considering moving their children to cheaper schools. (AP Photo/Amr Nabil)

In this Friday, Nov. 25, 2016, Egyptians shop at a popular market in Cairo, Egypt. Struggling to cope with price increases, some Egyptians are scrimping on meals, buying used clothes or considering moving their children to cheaper schools. (AP Photo/Amr Nabil)

CAIRO — Money had already been tight as food and electricity bills climbed for weeks. So Ashraf Mahrous, a 45-year-old civil servant, warned his wife, "Black days are ahead," when Egypt floated its pound and hiked fuel prices this month.

Mahrous is now looking for a side job. Rising inflation has forced him to stop eating chicken and borrow cash from friends to make ends meet. He also gave up his regular evening cafe visits and slashed his son's allowance.

"We can no longer survive on my salary," Mahrous, a father of two, said. "The situation is very, very, very difficult."

Struggling to cope with price increases, some Egyptians are scrimping on meals, buying used clothes or considering moving their children to cheaper schools. Even the better off are feeling the pinch. And more price jumps are likely amid a slew of economic decisions designed to revive a battered economy, lure back investors and end a dollar crunch.

Egypt recently took what many economists say is the necessary step of floating its pound and cutting fuel subsidies as it sealed a $12 billion loan deal with the International Monetary Fund. The Egyptian pound quickly lost about half its value, plunging to around 18 to the dollar, in a country heavily dependent on imports ranging from food items to raw materials. With salaries remaining largely the same, nearly everyone in the already deeply impoverished country effectively had a sudden, large pay cut.

Multiple previous governments had balked at such moves for fear of stoking unrest. The devaluation came after other steps that increased prices — the introduction of a value-added tax and hike in household electricity prices.

Even before the pound plunge, inflation had stood at 13.6 per cent in October. A hard currency crisis led to shortages in medicines and basic staples like sugar. Unrest and uncertainty after Egypt's 2011 uprising has hurt tourism and deterred foreign investors.

"Egyptians are in for a tough time over the next year," said Jason Tuvey, Middle East economist at Capital Economics who expects inflation to peak at more than 20 per cent in the middle of next year. While the recent decisions "should ultimately lay the foundations for a period of stronger economic growth," it will take time before such benefits can be reaped, he said.

Mohamed Abu Basha, senior economist at investment bank EFG-Hermes, said he expects inflation to average 18.5 per cent in the fiscal year that ends in July 2017, reaching the highest annual average since at least 2008.

The first signs of relief aren't likely before mid-2017, he said. After that, economic recovery may start as foreign currency shortages ease and investment picks up, he said. Finance Minister Amr el-Garhy said inflation was expected to ease to around 10 per cent during the second half of 2017, according to the state-run news agency.

Tuvey predicts inflation won't fall back to single digits until near the end of 2018, and it could take even longer before Egyptians see the rewards for their sacrifices in the form of more jobs and wage growth. Investors want to see more changes to improve the business environment, he said.

"Egypt has all the ingredients to become a manufacturing hub," he said. "To the extent that a weaker pound and economic reforms could spark a move in that direction, we'd certainly see job prospects stem from prospects of growth, and wages as well should pick up."

Until then, officials have counselled patience and promised to protect the neediest. In a bid to soften the blow, the central bank raised its key interest rates by three percentage points this month and the army is handing out millions of food parcels at discounted prices.

These efforts provide little consolation to Mahrous, who said his daily transportation costs have increased after the fuel subsidy cuts. Food eats up the largest chunk of his salary of 1,300 pounds a month, he said. That leaves him straining to cover other rising expenses, like monthly fees for his son's private lessons, which went up to 175 pounds from 150.

The new costs lent added urgency to a thus-far futile search for a second job that he started after his power bill doubled a few months ago. He said he's been hoping to work as a store clerk "but shop owners are under the same pressures as us."

So he and his wife are cutting corners.

They turned to cheaper, lower quality brands of the bread, juice and cheese they buy for their kids. They stopped buying whole chickens and have been reduced to making soup out of chicken carcasses — and even the price for that has increased lately, he said.

He blames the government for his troubles and says he'd like to see officials trim their expenses before they ask the poor to tighten the belt.

"We're being slaughtered from all directions," he said. "With the floating of the pound, we've all drowned."

While the challenges of the poor dwarf those facing the more affluent, they too say they are increasingly feeling burdened.

Winter clothes' prices this season inspired 30-year-old Nilly Zaher to create "Women Against Price Increases," a Facebook group to sell or barter used apparel. It drew more than 900 members since it was founded more than a month ago. Already, the group has expanded to include books and electronics.

"The floating of the pound and talk of even more inflation will probably give rise to more such ideas," she said.

Osman Badran, founder and managing director of a branding agency, says his family's grocery bills have ballooned and he's had to scale back on outings. But it's his three children's education that keeps him up at night.

The pound's plunge meant that their dollar-pegged tuition at a local American school instantly doubled. Unless a deal is reached with the school, parents would have to pay the new Egyptian-pound equivalent of an average of $11,000 per year for each kid, he said. He is now looking into transferring the children.

"Inflation is higher than incomes and salary increases," he said. "The moment the price of the dollar goes up, everything else shoots up."

To be sure, not everyone is penny-pinching and trendy street-side cafes in upscale neighbourhoods like Zamalek and Heliopolis still teem with customers huddled around lattes, burgers or water pipes.

Still, inflation has prompted calls for a boycott of all purchases on Dec. 1 as some blame the hikes on the greed of merchants.

Mervat Makar, who is heeding appeals to refrain from all purchases that day, says the government must monitor prices. "We feel like we're under the mercy of the traders and their whims," she said.

Even Egypt's "food of the poor," a staple of cooked fava beans called ful, has been hit, said one vendor, Ashour Kamel. He said he can't raise prices — some regulars are already cutting back on orders — but higher costs of ingredients from oil to potatoes are chipping away at profits.

"People cannot afford stuff anymore," he said. "You want to make changes, fine, but don't slaughter us."