Egypt’s leading cigarette company on brink as dollar reserves go up in smoke


On heels of national sugar crisis amid currency shortage, Egypt now faces potential shortage of cigarettes

Egyptian man smokes cigarette as he queues with other voters outside polling station in Giza, south of Cairo (AFP/File photo)
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Last update: 
Thursday 27 October 2016 3:20 UTC

Egypt's top cigarette maker, Eastern Company, has had its raw material reserves halved amid the country's dollar shortage and may be forced to suspend production and sales, the company said in a report on Wednesday.

Egypt has grappled with a shortage of dollars since the 2011 uprising and the often chaotic situation that followed, which has driven away many tourists and foreign investors.

Translation: “The dollar crisis is threatening the stop the ‘Eastern Company’ from work… Woohoo now a revolution will erupt because there aren’t any cigarettes”

"Key requirements for production that have no local alternatives are drawn down to six months, which means that if the situation persists for a longer time the company will have to halt producing and selling important commodities to consumers," Eastern said in a statement.

The Eastern Company produces a variety of cigarettes and cigars both for export and domestic consumption.

Their most famous product is Egypt’s flagship cigarette brand "Cleopatra," one of the world's top 10 best selling brands, which is sold across the Middle East, Africa and Asia.

Eastern Company said it needs $30m per month to purchase raw materials and spare parts. The company has traditionally relied on its partner, the cigarette conglomerate Phillip Morris, for this money, but Phillip Morris has stopped its assistance because of the dollar shortage.

By the end of last month, Eastern Company's strategic reserves had declined from two years worth of supplies to 12 months.

File #ثلاجه_السيسي

Translation: “The Eastern Company in Egypt is threatened with stopping its work because of a lack of foreign currency. Companies are beginning to be openly affected by the lack of currency #Sisi’s_fridge”

The English-language daily Egypt Independent reported in 2013 that Egyptians consume about 80bn cigarettes a year – the equivalent of 4bn packs annually.

According to Egypt’s official statistics agency, almost 20 percent of Egyptians over the age of 15 smoke, and 60 percent of smokers between the ages of 15 and 24 smoke on a daily basis.

Since taking office, Egyptian President Abdel Fattah el-Sisi has repeatedly increased taxes on cigarettes, such as a February 2015 decision that raised taxes on local and imported cigarettes by 50 percent.

Mohamed Othman, head of the Eastern Company, later denied that his company could be forced to halt production amid the dollar crisis, after its report was picked up by local and international media.

Speaking to Egyptian daily al-Masry al-Youm, he denied reports by foreign news agencies, including Reuters, that his company may halt production – or that the company is facing a crisis at all.

He confirmed that the company’s strategic reserves were only worth 12 months of supplies, but denied that this was an issue.

Regarding the report itself, he told the Egyptian newspaper that it simply contained "observations" from the country’s independent Central Auditing Organisation, and that his company will have no issue importing necessary raw materials.