Are you noticing that most goods ranging from cars to clothing to construction material (and many other products) have become more expensive and some others you can’t even find at all?
You can blame this on the latest rounds of global inflation and supply chain problems as well as the new import rules.
In this article we will break down the current state of affairs, explaining each of these issues and how it impacts the goods market in Egypt.
Global Inflation:
After the devastating effects of the Corona Pandemic, a recovery in many sectors of global trade were expected to boom but the reality of the situation was that we are still a long way from recovery.
The subsequent war in Ukraine and the trade embargo on Russia caused both basic foodstuffs and fuel prices to go up and threaten many regions with famine and pricerier petroleum & gas prices.
Inflation was the logical result as the prices of transport went up and with it the prices of most items and this couldn’t have come at a worse time as there was a ~15% devaluation of the Egyptian Pound last March.
A weaker pound means a higher exchange rate adding another burden for the consumers whose salaries went down in value and the added cost of inflation basically inflated prices by at least 30% in many areas.
Supply Chain Problems
The problem with many agile logistics systems in place before Covid means that while they are optimized they could not withstand sudden problems or bottlenecks in the supply chain.
This meant that when every aspect of business, from making the products to transporting them, had problems and delays or even whole sections stopped entirely on how bad the pandemic was everything down the chain got hit too.
As the war in Ukraine increased transport costs, the physical flow of trade in the region stopped due to mutual blockades and embargoes and that added more disturbances to global trade and consumers were on the receiving end of these issues…
Government Intervention
In a bid to stop the country bleeding hard currency to stabilize the Egyptian pound’s value, a general import ban on 13 classes of products was placed initially with raw material for manufacturing being exempted.
Following that decision a change in import laws meant that businesses could pay for their deals by using only Letters of Credit using the company funds.
Many businessmen objected to the decision as their opinions weren’t taken into consideration before that decision was made and the resulting confusion and increased expenses and inflexibility of this approach with some foriegn firms only increased the prices to the final consumer.
The reasoning of the government was that this would encourage local manufacturers to produce more goods here covering local demand and exporting the excess while stopping the flow of dollars outside the country especially for luxury or nonessential goods.
A recovery amid all these problems is unlikely and unfortunately the problems are expected to persist however these conditions tend to offer opportunities for local manufacturers and the trade in second hand items.
