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A Devalued Egyptian Pound, What’s at Stake?

The year 2023 began with production cuts and job losses for the Egyptian market as businesses reduced output and cut down on employment due to poor sales caused by high inflation rates. The recent Egyptian Purchasing Managers’ Index (PMI), compiled by S&P Global Market Intelligence, revealed that output and new business fall at sharp but softer rates alongside job cuts and a decrease in stock levels. The report indicates a reduction in economic activities triggered by a decline in buying power. “Lower activity typically reflects weak demand conditions, as a hike in the prices of goods and services reduced buyers’ purchasing power,” the report indicates. The reduction occurred because of rapid inflation that persistently hindered the Egyptian non-oil sector at the end of 2022. A weakened Egyptian pound makes the nation’s exports more competitive in global markets and simultaneously makes imports more expensive, giving rise to inflation in the country. Businesses would be forced to bear the brunt of the economic fallouts due to the rise in production costs. Such economic trends can cause stunted growth for businesses or force them to cut down on staffing (creating more unemployment). Also, buying power would decline as people begin to search for cheaper or improvised alternatives against luxury and quantity.