CBE governor Tarek Amer (AFP)
Egypt's currency black market has been almost eliminated since the flotation of the Egyptian pound in November, Tarek Amer, the head of the Central Bank of Egypt (CBE), said in a TV interview broadcast on Monday.
He also said that ongoing consumer inflation means a boost for locally produced goods over expensive imports.
The interview was recorded on Sunday on the sidelines of a meeting with South Sinai investors over a new EGP 5 billion fund to support tourism.
“Of course, there are negative outcomes for citizens because of the latest decisions," Amer said.
"Citizens are the heroes, as President El-Sisi said, and they will withstand the situation in the short term, especially since they know that there are serious programmes that the government is working on,” he said.
He added that consumer prices would drop when Egypt’s exports increase, combined with the return of tourism and the attraction of more investments.
“The difficult phase has passed. The next period should be better,” Amer said.
In 2014, the Egyptian government embarked on an economic reform programme that included the gradual phasing out of energy subsidies and the introduction of new taxes.
He said the banks have now taken the upper hand in the foreign-exchange market.
"The proof is that banks have been able to raise around US$6.5 billion since the decisions, which is 15 times more than what was being collected before the flotation of the pound.”
In early November, the CBE took a much-anticipated decision to float the pound and raise key interest rates, part of a set of reforms aimed at alleviating the dollar shortage, eradicating the black market and stabilising the country's flagging economy.
Amer said that the current weak price of the Egyptian currency does not reflect the improvements to the Egyptian economy.
“We’ll get there," he said.
He also spoke about the CBE’s intention to continue raising foreign reserves, asserting that they will always be “on a rise”.
Egypt had roughly $36 billion in reserves before the 2011 uprising that overthrew President Hosni Mubarak and ushered in a period of political turmoil that scared away tourists and foreign investors, two key sources of foreign exchange.
“The foreign reserves have hit the highest benchmark since after 2011 and this is a very good effort,” Amer said.
Foreign reserves climbed to $23 billion by the end of November, up from $19 billion in October 2016, according to government figures.
The increase follows an International Monetary Fund (IMF) decision to transfer an initial batch of $2.75 billion to Egypt, following approval for Egypt’s $12 billion loan in November.
The CBE governor also said that the country’s ability to attract foreign investment has changed completely since the currency flotation, elaborating that the former value of the pound against the dollar — a key factor in attracting investment — constricted such abilities.
“We had to change the policies. We no longer receive what we used to receive from our brothers, so we need additional money that would compensate for that,” Amer said, pointing to aid received by the Gulf countries in the past year.
Amer also spoke of imports, adding that banks were able to provide $7 billion for imports since the flotation, a figure he described as “ten times what they used to provide.”