Between interest rate hikes and currency devaluations Cairo is attempting a difficult balancing act that is unlikely to succeed.

The currency devaluation earlier this year has been countered by a number of recent interest rate increases as the government looks at ways to protect people’s savings and pensions.

The Monetary Policy Committee of the Central Bank of Egypt (CBE) raised its basic interest rate by one per cent on 16 June. The decision, which was made during the CBE’s policy meeting, takes the central bank interest rates to an 11-year high.

The rate hike follows reports in May that inflation in Egypt increased by 12.4 per cent year-on-year in May as price pressures continue.

Despite this, living costs have continued to increase with many groups in society finding day-to-day living more difficult. The government will fear that this translates into declining support for President Abdul Fatah al-Sisi and his economic roadmap.

Egypt’s import dependent economy has also been hit by recent increases on import tariffs in a bid to support local products. The combination has meant Egypt is now a much more expensive place for people and businesses; a reality that is bound to stunt growth moving forward.

Cairo’s attempts to alleviate rising living costs as it continues with tighter monetary policies are likely to fail. This dampens growth as consumer spending declines; it also raises concerns for local industries as supply chains also become unmanageable.

So far this year Al-Sisi’s administration has frustrated ordinary Egyptians as well as industries and companies. Egyptians as well as foreign investors have found the current state of the economy difficult.

Despite recent polls showing strong support for Al-Sisi, a difficult business environment and deteriorating living conditions caused by high prices could mean that the government and its leadership loses support over its inability to improve the economy two years into Al-Sisi’s time in office.

In addition to this, a recent order by a court to rescind the decision to cede the sovereignty of two Red Sea islands to Saudi Arabia indicates that not all state intuitions are onboard Al-Sisi’s plans.

Al-Sisi’s inability to deliver on economic stability coupled with contentious political decisions to appease his biggest donor may cost him and his government widespread support. If the combination of public dissent and political disagreements within the armed forces continue to gather pace, the entire Al-Sisi project launched in 2015 could be under threat.

The first half of this year has been difficult for Egypt. Tourism has reached a grinding halt and economic recovery in the short-term is proving impossible as fiscal headwinds slow growth.

The government will be hoping for a change of fortunes in the second half of 2016 as it anxiously monitors support across all state and civil institutions.