Despite rosy data, economy leaves Egyptians struggling

CAIRO - Economists and investment banks say Egypt's economic reforms have been a huge success. Zeinab doesn't think so.

"Everything is expensive," said the elderly woman, walking through a market in central Cairo. "I mean, the basic things - expensive electricity, expensive gas, expensive water, expensive living. What are people to do? Should people steal to live?"

On paper, data appears to show that reforms launched with the International Monetary Fund (IMF) in 2016 are working.

Inflation hit its lowest in four years last month despite a round of fuel price hikes. Unemployment fell to 7.5% in the second quarter of 2019 from 9.9% in the same period of 2018 and the non-oil private sector expanded slightly in July.

Bankers' research reports have been celebrating Egypt as one of the hottest emerging markets stories, with debt investments surging. Expressing confidence that inflation is under control, the central bank last week cut interest rates, and analysts expect more cuts.

But ordinary Egyptians complain that they see no improvement in day-to-day life after years of price rises, a currency devaluation and austerity in return for a $12 billion IMF loan.

In a country rights activists say is in the midst of a crackdown on freedoms, there has been no sign of protests. But Egyptians, who have been asked to be patient for better lives for five years, have grown increasingly frustrated.

"They don't feel for anybody. Honestly, they don't feel for anybody," she said. "If the president knew about these things - there are a lot of poor people, Mr. President, people only our Lord knows of. So do us a favour and send someone."

The IMF measures were designed to bring Egypt's budget and balance of payments deficits under control after the turmoil following the 2011 uprising that unseated Hosni Mubarak.

"The reform story in Egypt is the best in (Eastern Europe, Middle East and Africa), in our view, and perhaps in emerging markets overall," UK-based Renaissance Capital said in a report in June. "We remain very bullish on Egypt."

But for Ahmed, a 61-year-old tapestry craftsman, the past five years have been miserable.

"Honestly? We say 'where are you, Hosni (Mubarak), and where are your days?' Hosni's days are irreplaceable - we knew his worth when he left," he said, asking like others who spoke to Reuters about the economy, to use only his first name.

'We all pay'

The percentage of Egyptians living below the poverty line rose to 32.5% in the 2017/18 financial year from 27.8% in 2015/16, the state statistics agency said in July. It sets the national poverty line at 8,827 Egyptian pounds ($534) a year.

Employment in the non-oil private sector contracted in 53 of the past 60 months, according to IHS Markit's Purchasing Managers' Index (PMI).

Public service workers' wages increased by an average of 3.4% year-on-year in the second quarter of 2018, according to Reuters calculations based on finance ministry data - not nearly enough to match inflation that peaked at 33% in 2017.

Mohsen Kamal, a middle-aged bread baker, said young people struggle to find work, and are underpaid when they do find jobs, particularly if they want to earn enough to start a family.

"How much will [a young man] earn? Three thousand pounds? Okay, a flat's rent is 1,200 or 1,700 pounds - what water will he pay for and what electricity and what gas? And what transport will he ride? Today, the cheapest bus ticket is five pounds," he said.

The lifting of fuel subsidies, a key part of the IMF deal, has been particularly painful, as higher transport costs lead to higher prices for almost all goods.

"Who pays the price? You tell me," Essam, a middle-aged fruit seller, said of the fuel price hikes. "We all pay."

To help curb the effects of the austerity measures and inflation, the government has put in place targeted safety net programmes.

Angus Blair, head of Cairo-based think-tank Signet, said the government should invest in smaller infrastructure projects nationwide, rather than focusing on megaprojects. It should also engage with the private sector to help it grow faster, he said.

"The economy is growing strongly, but it hasn't yet fed down to significant job creation," he said. "But the overall picture, from a macroeconomic standpoint, has improved."

President Abdel Fattah al-Sisi has repeatedly hailed Egyptians' patience with austerity and promised the reforms would eventually improve standards of living.

Sisi took office in 2014 after leading the military overthrow of Egypt's first democratically elected president, Mohamed Mursi of the Muslim Brotherhood, in 2013 following mass protests against his rule.

"All that is asked is one thing: wait and you will see. Wait and you will see wondrous wonders in Egypt," Sisi said last year.

Mohsen complained that the wait has been too long.

"Until now, I haven't seen any improvement," he said. "We are patient, but what will the patience end with?"