EGP current price is golden chance for 'Made in Egypt' to compete globally: Experts

Ahmed El-Mahdi, Tuesday 2 Apr 2024

Experts say that Egyptian exports now have an opportunity to grow and compete globally due to the depreciation of the pound against the dollar.

worker
a worker paints a stenciled cloth at the Malaika Linens factory in the 6th of October industrial zone southwest of Egypt s capital. AFP

 

In March, the Egyptian pound dropped against the US dollar from EGP 30.9/$1 to EGP 47/$1 after the Central Bank of Egypt (CBE) floated the local currency as part of a major economic reform programme.

This could be a boon to Egyptian export sectors that rely on local components in the production process, particularly commodity exporters, according to various experts.

Egypt's commodity exports for 2023 amounted to approximately $35.631 billion, according to data from the Ministry of Trade and Industry.

In 2023, exports of construction materials, food, and agricultural products comprised around 49 percent, or $17.4 billion, of this total.

Similarly, in 2024, these three sectors accounted for 49.9 percent, or $1.49 billion, of commodity exports, according to trade ministry data.

Construction exports boom
 

“The recent flotation of the Egyptian pound against the US dollar will have a positive impact on the construction sector over the short term,” Walid Gamal Eldin, chairman of the Export Council for Building, Refractory, and Metallurgy Industries, told Ahram Online.

Most of the construction sector’s industries rely on the domestic market for 60 to 70 percent of production components for their products, which increases its global competitiveness.

Building material exports ranked first in the export sector in January, generating $624 million.

In 2023, building material exports grew 26 percent in to reach $8.8 billion.

Gamal Eldin expects exporters to reduce the end product prices to be competitive in global markets. 

“They will leverage the dollar's rise against the pound to set prices at levels that are not competitive during the current year.”

Since late February, Egypt has successfully raised over $58 billion from abroad, helping to contain the dollar’s black market that fueled price instability over the past couple of years.

Large companies, accustomed to transacting in dollars through banks, are poised to benefit from the pound's depreciation against the dollar in the official market, unlike numerous individual and family-owned businesses, Gamal Eldin explained.

Growing agricultural exports
 

Agriculture Export Council Deputy Chairman Hesham ElNaggar anticipates agricultural exports to increase by more than threefold by 2030 on the back of eliminating the black market for the dollar.

ElNaggar expects a 25-30 percent increase in citrus exports over the next two months and an increase in grapes exports later in the year.

"The coming export season, which starts in December, is poised to be more advantageous than the current one, capitalizing on the advantages stemming from the devaluation of the local currency against the dollar," he continued.

The recent instability and rampant speculation in the dollar in the black market meant farmers had to deal with higher prices for fertilizers, pesticides, and packaging materials, coupled with a 30 percent wage increase for workers every six months.

The value of an acre of oranges has surged from EGP 45,000 to EGP 100,000 over the past two years.

"Furthermore, the deliberate reduction of export prices by some in the sector, aiming to bring in dollars and engage in trading within the parallel market, has inflicted financial losses on exporting factories," ElNaggar added.

Moreover, Egyptian farmers will benefit from the new Trieste-Damietta Ro-Ro maritime line scheduled for October.

ElNaggar stated that the export sector hopes for three regular weekly trips between the Egyptian and Italian ports.

"The shipping line will reduce shipping time to the European market, for agriculture products that can now arrive within a maximum of three days in northern and central Europe," according to ElNaggar.

“We will also work on capturing a share of Spain's exports to the European market after our competitive prices and the water problem suffered by Spain,” he said.

Growth in food exports
 

"The pound depreciation presents a significant opportunity for exports to increase by no less than 20 percent this year," the former head of the Food Export Council Alaa El-Bahi said.

In 2023, food industry exports totalled $5 billion.

However, in January 2024, food exports made $408 million as revenues.

El-Bahi added that most of the raw materials needed by food industries are locally available, which minimizes reliance on the dollar and facilitates an increase in export returns that surpasses the needs of the food industries sector.

The government has finalized customs clearance procedures for all accumulated goods valued at $4.5 billion.

Of this amount, goods worth $2.8 billion have been released. However, claimers of the remaining $1.7 billion goods have declined to receive them, awaiting a further decline in the dollar's value, according to Prime Minister Mostafa Madbouly.

Exchange rate stability is one of the most critical factors for export success as it enables exporters to accurately calculate costs and establish competitive export prices in foreign markets, according to El-Bahi.

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