Egypt to implement 'urgent' plan to secure foreign currency: PM

Amr Kandil , Wednesday 7 Dec 2022

Egypt will implement an "urgent and solid" plan to secure the country's foreign currency needs and enable the economy to keep moving with some flexibility amid the current global crisis, Prime Minister Mostafa Madbouly said on Wednesday.

Cabinet
Egypt s Prime Minister Mostafa Madbouly holds a press conference following the weekly Cabinet meeting in the New Administrative Capital, east of Cairo, 7 December 2022. Cabinet

 

In a press conference following the Cabinet's weekly meeting in the New Administrative Capital, Madbouly said the plan will run on the short term until 30 June 2023, which marks the end of the fiscal year 2022/2023, and on the medium term over the next two to three years.

The plan comes in coordination between the Central Bank of Egypt (CBE) and the ministries, Madbouly said .

The premier did not give further details of the plan, saying that some of the state's steps must not be announced in advance.

"Some of the steps have to remain unannounced until they are implemented on the ground, because announcing them beforehand can have negative repercussions," Madbouly said during the press conference.

Within two months, the state will be able to resolve all problems related to letters of credit (LCs), Madbouly said, noting that the state is doing everything to restore a level of stability despite the crisis.

Late in October, the CBE had said that it will begin a process of gradually phasing out a February decsion that mandated the use of LCs for import finance as a way to control foreign exchange. The CBE said that the process was to end by December.  

The CBE also announced in October raising the exception limit of LCs for imported shipments from $5,000 to $500,000, a decision that represented a step toward phasing out LCs.

The LCs, in effect since March, has put restrictions on importers and caused imported goods to be blocked at ports.

During today's press conference, Madbouly said the CBE's decision to raise LCs' exception limits has helped release a large part of the goods, noting that the state is working to release other lists of goods gradually.

The state has allocated EGP 130 billion in reserves in the state's budget to avoid any significant rises in prices of goods for local consumption as a result of the global crisis, Madbouly said.

Egypt’s economy, like other economies worldwide, has been hit by the Russia-Ukraine crisis amid growing global inflation and rise in energy and food prices.

So far, the CBE has hiked the key interest rates by a total of five percent (500 bps) in 2022 to contain the inflationary pressure caused by elevated global inflation and the repercussions of the war in Ukraine.

The war in Ukraine has also applied pressure on the Egyptian currency, causing the country to apply two major currency devaluations this year which according to Reuters amount to 36 percent in total.

In addition, Egypt announced in October reaching a new $3 billion loan agreement with the IMF to help the country “meet the external obligations that were exacerbated as a result of the Russian-Ukrainian conflict,” according to CBE Governor Hassan Abdalla.

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