Amid reports the black market exchange rate for US dollars had climbed to a new record of LE9.80 on Sunday, Egyptian MPs called on the country’s economic authorities to take action to stem the dollar crisis.
Among parliamentarians speaking out about the dollar crisis was Farag Amer, who made an urgent statement asking the speaker of parliament to summon the Central Bank governor and calling on the prime minister and the minister of civil aviation to address the “worsening economic crisis and dollar shortage.”
Other parliamentarians also expressed concerns regarding the high black market exchange rate, as well as the difficulties companies face in importing raw materials for local factories, according to local news site Parlamany.
While the black market rate has soared, the official exchange rate for the dollar has been fixed at LE7.73 since November, with banks allowed to sell dollars for up to LE7.83. Central Bank Governor Tarek Amer recently declared in a televised February 21 interview that the bank has no intention of floating the pound until Egypt’s foreign reserves recover to US$25-30 billion.
As of the end of February, Egypt’s foreign reserves stood at $16.533 billion, according to the Central Bank — a figure that has remained relatively steady since the end of September 2015.
The CBE has maintained its official exchange rate through thrice-weekly currency auctions to local banks, but the dollars it is channeling into banks are not enough to meet demand. As a result, black market demand and prices have soared.
On Sunday, the Central Bank held a special auction in which it offered $500 million to cover strategic imports, Reuters reported. However, the concerns surrounding the dollar shortage extend much wider.
An increasing range of businesses are also reporting that the dollar shortage is having a severe impact on their bottom lines. Local businesses that rely on imports to produce or sell consumer goods have been reporting problems since February 2015, when the government tightened currency controls in an attempt to crush the black market.
In recent months, multinationals have reported that they too are having trouble maintaining their Egyptian operations due to the currency crunch. Some cite shortages of the dollars they need to import critical supplies, such as General Motors, which was forced to temporarily suspend production last month. Others report difficulty repatriating profits.
In an interview with Bloomberg news, the managing director of Suez Cement, the local unit of Italy-based Italcementi’s said the company has been unable to repatriate EU50 million in profit and may move its regional headquarters out of Egypt. The government is also reportedly trying to reach a settlement with airlines, who have threatened to limit their local operations if they cannot transfer their profits out of the country.
Although parliamentarians and other officials are speaking out about the dollar crisis, few appear willing to publicly endorse the approach almost universally called for by non-government economists — devaluing the Egyptian pound.
In September, Investment Minister Ashraf Salman caused a row with the Central Bank when he publicly called for a devaluation of the pound in order to protect Egypt’s foreign reserves. At the time, reserves exceeded $19 billion. Since then, official statements from the government have focused on the need to reduce Egypt’s reliance on imported goods, and encourage more Egyptian expatriates to deposit their overseas earnings in local banks.