Egypt’s president says to keep basic goods prices stable despite dollar crisis

Cairo: Egypt’s President Abdul Fattah Al Sissi said on Wednesday he would make sure the price of basic goods does not increase regardless of what happens to the value of the currency.

Egypt relies heavily on imports and has been facing a dollar shortage since the popular uprising in 2011 drove away tourists and foreign investors, major sources of hard currency.

The government has taken a series of measures to keep the price of basic goods from rising, rolling out army trucks to distribute subsidised food items for its poorest and identifying key goods to monitor for price rises.

A black market for dollars has sucked up liquidity from the banking system while the central bank kept the pound artificially strong and rationed dollars through weekly auctions, putting a strain on foreign reserves.

“The prices of basic goods will not increase no matter what happens to the dollar, and nothing will happen,” Al Sissi said in a speech. “The military and the government are responsible, it’s a promise.” The Egyptian pound has weakened in recent weeks on the black market with traders on Tuesday giving a range of 10.25-10.28 per dollar. Egypt’s reserves more than halved to $16.56 billion (Dh60.7 billion) in March from around $36 billion in 2011.

Devaluation

In an attempt to close the gap between official and black market rates, the central bank devalued the currency to 8.85 per dollar from 7.7301 last month. It later strengthened it to 8.78 per dollar, while adopting a more flexible exchange-rate policy.

The central bank said it would move to a more flexible exchange rate regime, in an effort to rebalance markets and ease a foreign exchange shortage that had stifled business activity and hit confidence.

Factbox: World Bank set to provide Egypt with first $1b of $3b loan

The World Bank will provide the first $1 billion tranche of a $3 billion loan to Egypt after parliament approves the government’s economic programme, World Bank vice president Hafez Ganem said at a news conference late Tuesday.

Parliament is expected to pass the programme in April.

Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolt and ease a dollar shortage that has crippled import activity and hampered recovery.

The lender had agreed to provide the first $1 billion in December but is waiting for the government’s economic programme, which outlines the broad strokes of its reform plans, to be passed by parliament.

The government presented a programme to parliament in late March that aimed to reduce the budget deficit while protecting the poor.

The World Bank told Reuters in December that the first tranche was focused on “10 prior actions for policy and institutional reforms” already implemented. The second and third tranches are linked to additional reforms the government plans.