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Citizens brace for hard times amid austerity measures

At a minibus station in Cairo, Mohamed Seddik, a hotel cleaner, asked how he would possibly be able to afford the new prices.

Egyptians are reeling after months of experiencing shortages of products ranging from sugar to baby formula

Egyptians are looking at a period of hardship as the government unrolls austerity measures including a floating pound that has drastically depreciated the currency and raised prices, analysts say.

The measures, in return for a $12 billion IMF loan, had been avoided by governments fearing unrest, but President Abdel Fattah al-Sisi says Egypt no longer has the luxury of postponing them.

Last week's Central Bank decision to float the pound, amid a dollar crunch that led to a thriving black market and a slump in imports, caused its value to plunge from 8.89 to the dollar to about 16.

The drastic move, welcomed by creditors and investors, was followed with a fuel price increase.

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At a minibus station in Cairo, Mohamed Seddik, a hotel cleaner, asked how he would possibly be able to afford the new prices.

"How am I supposed to live if a kilo of sugar that used to cost 4.5 pounds now costs 10, and a kilo of rice has risen from three to four pounds?" said Seddik, who said he earns 1,500 pounds (around $94) a month.

Analysts say there was no alternative to the tough measures, after years of unrest battered the economy and drove away tourists and investment.

But the quick succession of measures will spike prices, said Omar el-Shenety, head of Multiples Group investment bank.

"Inflation may rise to 20 percent, or a little less, over the next year and a half," he said, up from 14 percent this year.

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American University in Cairo economics professor Amr Adly said the measures could deepen the impact of an economic crisis caused by the dollar shortage while increasing inflation.

- Economic 'earthquake'-

Egyptians are already reeling, after months of experiencing shortages of products ranging from sugar to baby formula.

"It's not just transport, it's everything, especially basic necessities like oil, sugar and rice," said Samar, a 30-year-old housewife who was escorting her three children back from school.

On Sunday, the Al-Mal economic newspaper reported that the prices of vegetables and fruits had seen a "record jump", quoting an official saying transport prices had risen up to 40 percent.

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The government has said there would be an increase in prices but it would conduct inspections to ensure traders were not drastically raising them.

It also announced a seven percent salary increase for civil servants, who number about six million out of a total population of more than 90 million.

Egyptian newspapers have echoed the alarm over the rising prices.

"Government and parliament mobilise to contain the effects of the earthquake from floating the pound and hiking fuel prices," read a headline in the El-Watan private daily.

Adly says floating the pound brings dollars traded on the black market back to the official market, but the crisis will remain.

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"An economic crisis led the dollar shortage, not a crisis in monetary policy," he said.

The country saw repeated and often deadly protests after the ouster of president Hosni Mubarak in 2011 and the toppling of his Islamist successor Mohamed Morsi in 2013.

A jihadist insurgency since Morsi's overthrow has targeted policemen and soldiers, as well as tourists.

In October 2015, the Islamic State jihadist group claimed responsibility for bombing a Russian airliner carrying holidaymakers from a Red Sea resort, killing all 224 people on board.

Adly said economic indicators should improve in the midterm.

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"But that is tied to several factors including an improvement in global economic conditions and the European Union, which is the main importer for Egyptian goods."

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