by Marwa Yahia, Mahmoud Fouly
CAIRO, Jan. 18 (Xinhua) -- A wave of prices surge is expected to sweep across the Egyptian market in the near future, which economists say is a direct result of recent currency devaluation.
"The rising value of the dollar, along with increasing imports and decreasing exports, raised prices of 10 basic food commodities, including rice, oil and sugar," Emad Abdeen, secretary of Food Branch at Cairo Chamber of Commerce, told Xinhua.
The price of rice, a basic staple food for Egyptians, has increased by 38 percent, he said.
The skyrocketing food commodity prices have pushed up the living costs of ordinary Egyptians. Restaurants, including those selling popular and cheap local sandwiches, are forced to raise menu prices.
"The appreciation of the dollar caused our prices to rise too," said Karim Metwally, owner of a restaurant in the busy Dokki district of Cairo. The price of potato sandwiches in his shop rose 20 percent.
The prices hike plunged the North African country's creaky economy into a more difficult situation, analysts said.
Internal political bickering has set off a run on its domestic banks and exchange offices for dollars over the past several weeks, sending the currency to a record low against the U.S. dollar and draining foreign reserves to a critical level.
The Egyptian pound weakened to a record low of about 6.53 against the dollar on Thursday.
Meanwhile, the Central Bank of Egypt (CBE) warned of the alarming shrinking rate of the foreign currency reserves, down from 36 billion dollars in January 2011 to about 15 billion dollars at the end of 2012.
Observers say recession in tourism, foreign investment and exports is the main reason behind the country's dwindling foreign currency reserves.
"Egypt's imports are double its exports; even our exports are not purely Egyptian as they include imported components," said Sameh Zaki, vice president of Exports Branch at Cairo Chamber of Commerce.
Zaki said that the Egyptian pound will continue its plummet against the dollar in the absence of a right mechanism to stabilize the rate.
"The tendency of citizens to buy more U.S. dollars magnified the problem and increased the value of the dollar, while the CBE does not have sufficient resources to keep a balance between demand and supply," he said.
Mahmoud Salem, an economist, took a similar line, saying insufficient governmental supervision and prevailing monopoly polices contributed to the price hikes.
"The new mechanism adopted by the CBE to stop devaluation of the Egyptian pound against the U.S. dollar would only limit the decline, rather than stop it," said Khaled Hamza, an Egyptian businessman.
Political stability is a prerequisite for restoring local currency,Hamza said, warning that the massive anti-government protests scheduled for Jan. 25 would "negatively influence an economy crawling for survival."