Cairo: Egypt is moving to end its dollar exchange rate problem within months, President Abdul Fattah Al Sissi said, warning that the Arab world’s most populous nation could no longer put off tough measures if it hopes to revive its economy.
In an interview with three state-run newspapers published on Tuesday, the Egyptian leader said officials had waited too long to act, and that piecemeal measures taken over the years were no longer tenable. His comments offered some of the strongest indications yet that Egypt was moving to free its exchange rate or devalue its pound.
“The size of the challenges is beyond imagination, and the responsibility for coping with them doesn’t fall solely on my shoulders but is a responsibility shared by Egyptians as a whole,” Al Sissi told state-run Al Ahram. “The future of the nation is at stake.”
The impoverished country of more than 90 million faces tough economic measures if it is to secure a $12 billion (Dh44 billion) International Monetary Fund loan that could unlock billions of dollars more in aid. An initial agreement with the IMF, meant to restore the confidence of foreign investors and provide a desperately needed infusion of dollars, was reached earlier this month.
Economists expect the central bank to devalue the local currency or adopt a flexible exchange rate regime to try to attract investments and ease a crippling dollar shortage that’s hampering economic growth. Officials have worried that a sharp devaluation, coupled with the lifting of subsidies on key items such as fuel, could lead to a spike in inflation and trigger unrest. At the same time, with the decline in foreign reserves to $15.5 billion in July, the government’s ability to defend the currency has become increasingly limited.
The Egyptian currency is currently selling on the black market at a roughly 30 per cent discount to its official rate.
Egypt has struggled to spur economic growth and attract foreign investments since the 2011 uprising that ousted President Hosni Mubarak. The government’s economic programme includes plans to introduce value-added taxation, cut electricity subsidies and curb spending.
