Economy

Poverty and inflation: Egypt’s economy hit by global turmoil

Published

2 years ago

September 25, 2022

DUBAI, United Arab Emirates (AP) — Stores are selling winter clothes from last season in the middle of summer. Repair shops lack spare parts for appliances. There’s a waiting list to buy a new car.

Egypt, a country of more than 103 million people, is running low on foreign currency needed to buy essentials like grain and fuel. To keep U.S. dollars in the country, the government has tightened imports, meaning fewer new cars and summer dresses.

For the nearly third of Egyptians living in poverty, and the millions more in poor conditions, the country’s economic woes mean life is much harder than off-season shopping — they’re finding it harder to put food on the table. A decade after deadly protests and political upheaval rocked the Middle East’s most populous nation, the economy is still staggering and has taken new hits.

Fatima, a 32-year-old cleaner in Cairo, says her family stopped buying red meat five months ago. Chicken also has become a luxury. She’s borrowing from relatives to make ends meet.

She’s worried about the impact of high prices on Egypt’s social fabric. Asking to be identified only by her first name for fear of reprisal, she worries that crime and theft will increase “because people won’t have enough money to feed themselves.”

For decades, most Egyptians have depended on the government to keep basic goods affordable, but that social contract is under pressure due to the impact from Russia’s war in Ukraine. Egypt has sought loans to pay for grain imports for state-subsidized bread. It’s also grappling with surging consumer prices as the currency drops in value. The threat of food insecurity in the world’s largest importer of wheat, 80% of which comes from the war-torn Black Sea region, has raised concerns.

“In terms of, like, bread in exchange for freedom, that contract got violated a long time ago,” said Timothy Kaldas, an economic expert at the Tahrir Institute for Middle East Policy.

Annual inflation climbed to 15.3% in August, compared with just over 6% in the same month last year. The Egyptian pound recently hit a record low against a strengthening U.S. dollar, selling at 19.5 pounds to $1. That has widened trade and budget deficits as foreign reserves needed to buy grain and fuel plunged by nearly 10% in March, shortly after Russia’s invasion sent commodity prices soaring and investors pulled billions of dollars from Egypt.

Egypt has few options to deal with the hole in its finances. As with previous crises, it’s turned to Gulf Arab allies and the International Monetary Fund for a bailout.

A new IMF loan would buoy Egypt’s dwindling foreign reserves, which have fallen to $33 billion from $41 billion in February. A new loan, however, will add to Egypt’s ballooning foreign debt, which climbed from $37 billion in 2010 — before the Arab Spring uprisings — to $158 billion as of March, according to Egyptian central bank figures.

Leaders blame the challenges on the coronavirus pandemic, which hurt the vital tourism industry, and price shocks sparked by the war in Ukraine. They’ve also faulted revolutionaries and those who may have backed the Muslim Brotherhood.

“Why don’t you want to pay the cost of what you did in 2011 and 2013?” President Abdel Fattah el-Sissi said in televised remarks this month. “What you did — didn’t that negatively impact the economy?”

He was referring to protests, which toppled Egypt’s longtime president, ushered in a divisive Muslim Brotherhood presidency, and resulted in a populist-backed power grab by the military and el-Sissi’s ascension to the presidency.

The former military general said the fallout from those years cost Egypt $450 billion — a price, he said, everyone must bear.

“We solve the matter together. I am saying this to all Egyptians … we are going to finish this matter together and pay its price together,” he said.

Critics, however, argue the government has squandered chances to make real reforms and is overspending on superfluous mega-projects as it builds a new administrative capital. The government has touted the construction boom as a job producer and economic engine.

The state’s hold over the economy and the “outsized role of military-related enterprises” have historically crowded out foreign investors and the private sector, said Hasnain Malik, who heads equity research at Tellimer, an emerging-markets investment analysis firm. The government’s plans to sell off minority stakes in some state-owned enterprises “does not necessarily fix this problem,” he said.

Egypt’s elite can withstand rising costs, living comfortably in Nile-view apartments and gated communities beyond the hustle of Cairo. Life for middle-class Egyptians is deteriorating, said Maha, a 38-year-old tech company employee and mother of two who asked to only be identified by her first name to speak freely.

“I think we will eventually move down the social ladder and end up below the poverty line,” she said.

The government took out a $500 million loan from the World Bank this summer and $221 million from the African Development Bank to help buy wheat. That covers around six weeks of a bread subsidy program supporting 70 million low-income Egyptians.

China assisted with a $2.8 billion currency swap. Saudi Arabia, the United Arab Emirates and Qatar stepped in with pledges of $22 billion in short-term deposits and investments.

“Having what they define as stability in Egypt is in their strategic interests. They really don’t want to go through a repeat of 2011 and its aftermath,” said David Butter, an associate fellow at international affairs think tank Chatham House. Gulf Arab states are also making strategic investments in Egypt for the short and long-term, he said.

The government announced an “extraordinary” social protection program to roll out this month, targeting 9 million families with extended cash transfers and food coupons. This is on top of other assistance programs, including pop-up stands selling subsidized food staples. Officials point to how they managed the supply crunch brought on by the pandemic and the war in Ukraine, saying there is enough wheat and other basic food items for six months.

For some, leaving has promised more hope. Egyptians rank behind only Afghans as the top nationality of “irregular arrivals” to Europe so far this year, according to the International Organization for Migration’s flow chart. Most arrive by sea.

As pressure mounts on the Egyptian pound, the government could devalue the currency again.

“It’s going to hurt. It’s going to increase inflation,” said Kaldas, the Tahrir Institute economic expert. “Subsidies on bread is only one line-item in a family’s budget. So, for a lot of families, this is still going to be a lot of pain.”

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Follow Aya Batrawy on Twitter at www.twitter.com/ayaelb.

Aya Batrawy, The Associated Press

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Business

A timeline of events in the bread price-fixing scandal

Published

6 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

6 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

20 hours ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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