Hamdok is in Cairo to discuss a Sudanese truce

Pledging that economic conditions in Egypt would improve soon, Egyptian President Abdel Fattah El-Sisi, on Saturday, defended the decision to liberalize the exchange rate of the pound (float), despite his rejection of that last year. Al-Sisi said, during the “Martyr’s Day” celebration in Cairo: “We liberalized the exchange rate after providing the necessary amount for that.” He stressed that he “did not risk the country, and neither he nor the government made a wrong or incomplete decision that would waste Egypt.” He added: “We were not corrupt. We took your money and wasted it corruptly… This did not happen.”

Last Wednesday, the Egyptian Central Bank announced the liberalization of the exchange rate of the pound, allowing it to be determined according to market mechanisms, so that the value of the local currency fell to slightly less than 50 pounds to the dollar, after it had been stable for months at 30.85 pounds to the dollar.

Al-Sisi said, in his first comment on the Central Bank’s decision, that “during a previous conversation about 8 months ago, he rejected the float and confirmed that he stood against it because it affected Egyptian national security,” explaining that “economic estimates at that time indicated an inability to… The decision to float was made without the availability of an amount ranging from 80 to 90 billion dollars.

Al-Sisi added, in an impromptu speech, that “an amount ranging from 45 to 50 billion dollars has currently been made available through the Ras al-Hikma project, and the agreement with the International Monetary Fund and the European Union, in addition to other resources.” He continued: “When I have this number, I can make a flexible price according to demand, and I can still succeed.”

People’s security

The Egyptian President said during the inauguration of a number of projects last June: “Many people in Egypt are talking about the exchange rate of the dollar, and we are flexible about it so that things are clear, but when the matter is exposed to Egypt’s national security, and the Egyptian people could be lost.” As a result, do not (repeat it 3 times).”

In late February, Egypt announced the signing of a deal aimed at developing the city of Ras El Hekma on the northern coast, with ADQ Holding, one of the Emirati sovereign wealth funds, that would bring the country $35 billion over two months. Including $11 billion transferred from Emirati deposits already in the country.

Coinciding with the decision to “liberate the exchange rate,” the Egyptian government announced the agreement with the International Monetary Fund to increase the value of the loan to $8 billion, instead of $3 billion previously, in addition to its confirmation of seeking $1.2 billion from the IMF’s Environmental Sustainability Fund. For the benefit of vulnerable countries with low or middle income.

For his part, Egyptian economic expert Mustafa Badra told Asharq Al-Awsat that “the shortage of foreign currency has difficult repercussions on the economy and on Egyptians,” noting that “at the beginning of this year the country suffered from a severe shortage of foreign currency, and there were fears that The dollar exchange rate reached one hundred pounds, which would have caused social panic and affected prices and poor and rich families.”

The economic expert added, “Taking the decision to float earlier, with the country suffering from a shortage of foreign currency, meant that society was unable to meet its needs, whether at the level of citizens or at the level of manufacturers, but the decision to float now came after the availability of the foreign currency necessary to import.” Production requirements, moving factories, and providing goods in the markets, which reduces their prices.”

Shortage of hard currency

Egypt suffers from a long-term shortage of hard currency that worsened in early 2022, which “slowed down economic activity and led to a deficit in imported goods. This coincided with the acceleration of the inflation rate until it reached record high levels during the past year,” according to observers.

The Egyptian President pointed out that “Egypt has experienced a major crisis for more than 4 years as a result of the Corona pandemic, which lasted for two years, then the Russian-Ukrainian war that has been ongoing for 3 years, and after that the war in Gaza with all that this means in terms of a very great threat and challenge to Egypt.” And for the region. He said, “The previous circumstances and the pressure that Egyptians have endured over the past four years, which has increased in the last year with the rise in prices, require more effort, patience, and work in order to preserve and take care of the country.”

In the same context, Badra stressed that “external challenges complicated the situation in Egypt, and it was not possible to take decisions that would make the economic situation more difficult, so the political leadership’s decision was to postpone the flotation; Because that would have increased the import bill.” He pointed out “the decline in Egypt’s dollar revenues from the Suez Canal and tourism due to the repercussions of the war in Gaza, which affected the regional environment as a whole.”

Suez Canal revenues

Revenues from the Egyptian Suez Canal declined by 50 percent at the beginning of this year, according to official estimates, due to security tensions in the Red Sea, and the war in Gaza also affected tourism coming to the country.

The Egyptian President pointed out during his speech that “10 years of fighting and combating terrorism has its cost, and what happened in 2011 has its cost, and then in 2013 it also has a cost,” stressing that “this cost will not be able to be borne by one person.” He added, “Things are starting to improve.” Al-Sisi stressed that his speech and promises to the Egyptians have not changed, and that the solution to what the country is going through lies in the Egyptians themselves. “With work and patience, the country can overcome the current circumstances.”

He continued: “The difficult circumstances that we are going through were not created by us, and we did not risk the country, even though there were those who demanded the Egyptian army’s action, but we did not do that. Rather, we bear and help in resolving the crises as much as possible, at a time when the challenges facing national security, especially from The southern direction and other strategic directions, everyone should be responsible and vigilant,” he continued: “We are trying to be a factor of stability and peace, and not start fires here or there.”