Due to the Russia-Ukraine war and global inflation, Egypt's economy is facing many problems, and there is also a food crisis.
(European News Agency)
[Financial Channel/Comprehensive Report] The Belt and Road Initiative proposed by Xi Jinping has caused many poor countries to fall into debt crisis, and now there is another suffering culprit.
Due to the lack of foreign exchange, Egypt’s goods worth US$9.5 billion piled up in the port, unable to clear customs, and then turned to the IMF to collect the mess. The IMF just approved a US$3 billion loan for assistance. This is the fourth time Egypt has asked the IMF for help in six years.
According to comprehensive foreign reports, affected by the Russian-Ukrainian war and inflation, hot money withdrew from Egypt. Three weeks after the Russian-Ukrainian war broke out, foreign capital withdrew $20 billion from Egypt.
At the same time, Egypt's external debt soared to US$157.8 billion, an increase of nearly five times that of 10 years ago.
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Due to financial deterioration, the Egyptian government began to raise money. In April last year, Egypt sold Egypt's shares in five state-owned companies to the sovereign wealth fund of the United Arab Emirates for US$1.8 billion.
In August, the Saudi Arabian Public Investment Fund acquired the shares of the Egyptian government in four listed companies for US$1.3 billion.
In addition to selling assets, in order to maintain very little foreign exchange, Egypt announced last March that importers could only use letters of credit to import goods, resulting in a backlog of imported goods at the port that could not be cleared.
Subsequently, the Federation of Egyptian Chambers of Commerce, the Federation of Industries and importers complained that this policy would cause supply problems, increase production costs and increase prices. Finally, the Central Bank of Egypt announced the cancellation on December 29 last year.
Due to the shortage of U.S. dollars, the value of goods backlogged at the port has reached 9.5 billion U.S. dollars. After government coordination, the port has released goods worth 5 billion U.S. dollars from December 1 to 23.
Egyptian President Abdul Fattah al-Sisi said banks would get the foreign exchange needed to clear the backlog of imports as quickly as possible, without saying where the money would come from.
In order to avoid Egypt's financial collapse, the IMF has approved a 46-month loan of US$3 billion for Egypt. This is the fourth time that Egypt has turned to the IMF in six years.
The dollar shortage has left businesses struggling, with auto parts importer Rafik Clovis telling the Financial Times anxiously waiting throughout December to see if banks would be able to supply the $67,000 he needed to import a shipment of auto parts from Europe.
He said frankly, without dollars, I don’t know how to solve the problem. I have 5 employees, and now I rely on the income of the previous few years to maintain my livelihood.
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