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LETTER FROM THE EDITOR

THE NATION'S NIC FIT

A friend of mine who regularly commutes by microbus between Imbaba and Mohandiseen told me recently that, every time she makes the trip, the same thing happens.

One passenger will make a passing comment about the rising costs of living – about the current difficulty of keeping food on the table for a family of seven or of furnishing flats for the neighborhood’s next generation of newlyweds. The lone grumble, though, inevitably triggers a torrent of griping from the other riders, all of whom have inflation-related stories to tell.
And what of the precarious state of affairs in Iraq and Palestine? Surely passengers talk geopolitics with the same mix of passion and frustration, I asked.

Hardly, she told me. These days, it’s all about rising prices.

The unexpected movement of the black foreign currency market in September, meanwhile, suggests that the worst is far from over.

In August, many – including the editorial staff of Business Monthly – were ready to concede that January’s so-called free float really had worked out for the best; that it was actually on the verge of killing off the parallel currency market once and for all. Dollars were selling extra-legally for somewhere between £E 6.50 and £E 6.75, while official bank rates were at £E 6.20 and climbing.

When the two competing rates met, many assumed, the liquidity crisis would end, and dollars would be freely doled out by smiling bank tellers.

But we all know, of course, what happens to those who assume.
Just when people had begun countenancing the notion of investing in the Egyptian pound again, black market dollar rates suddenly went haywire, shooting through the roof in early September.

Black marketeers began asking for – and, reportedly, getting – as much as £E 7.10 to the dollar from their forex-strapped clientele.

Exactly what happened is unclear. So far, the reasons I’ve heard for the fresh pressure on the dollar include: the upcoming Umra season, when local pilgrims need foreign currency to travel to Saudi Arabia; the influx of dollar-hungry business tycoons returning from summer vacations; and the demands of importers scrambling to pay for the imported ingredients of traditional Ramadan staples.
While currency devaluation – if the currency in question in overvalued – is generally a positive thing, the £E 7 mark is psychologically relevant. For one, it’s exactly double the £E 3.50 that had long been, before 2000, the going rate.

Take the retail price of a pack of Marlboro cigarettes, which has, over the course of the last three years, more or less tracked the black-market price of the dollar. Tellingly, in mid-September, the cost per pack jumped from £E 6.75 to an even £E 7. At the same time, Marlboro introduced the arba’tasher – a slimmer, less expensive pack, holding only 14 cigarettes instead of the usual 20, and retailing for £E 4.50.

Marlboro’s marketers obviously knew that the £E 7 mark represented a psychological barrier; a point at which the consumer may very well say, “Enough.” (How many smokers have you heard say, “When it hits £E 7 a pack, I’m going to quit”?)

There will always be a demand for both commodities – anyone who deals with international markets needs dollars as badly as the nicotine-addicted need cigarettes. Nevertheless, the fall of the guinea – now worth half of what it did in 1999 – is sure to deeply perturb most domestic observers.

I recently heard a member of the ruling National Democratic Party’s economy committee saying that leftist economists regularly make the mistake of equating the relative value of the currency with its dignity, and that of the country in general.

Granted, the premise – when put into a global context – is faulty. The value of a currency should faithfully reflect its real worth vis-à-vis other currencies. A currency’s dignity, meanwhile, should be based on the competence and efficiency of the economy it represents.

After all, the devaluation has profoundly helped Egypt’s exports by making them more competitive on global markets, which, in turn, has led to a marked improvement in the country’s balance of trade.
But while the nation’s exporters can revel in increased sales receipts, that doesn’t mean much to the folks on the microbus.

Perhaps the government’s economists should do more to explain that full-scale liberalization requires lots and lots of patience – another commodity, these days especially, in short supply.

Adam Morrow

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