Egyptian President Abdel Fattah El-Sisi said on Wednesday that the dollar always represents a problem for the Egyptian state, commenting on the foreign currency shortage crisis that the country is currently suffering from, which has led to the price of the dollar on the black market rising to more than double its official price.
During his speech on the occasion of Police Day celebrations, Sisi pointed out that one of the reasons for the dollar problem is related to the government paying the cost of providing some services in dollars, while they are sold in the local market in pounds.
He said that Egypt, for example, spends a billion dollars a month on basic commodities such as wheat and vegetable oils, and the same amount on fuel.
Egypt faces major economic challenges, and a Reuters poll showed, on Wednesday, that the Egyptian economy will grow at a slower pace than previously expected with the decline of the pound and the decline in purchasing power as a result of high inflation and the repercussions of the war in Gaza on the main sources of foreign currency in the country.
Suez Canal revenues decreased by 40 percent year-on-year in the first half of January after the attacks launched by the Houthis in Yemen on commercial ships in the Red Sea and their impact on shipping movement in the sea lane. The war that broke out in Gaza in October also dampened tourism expectations.
The price of the pound fell on the parallel market to about 61 to the dollar from 39 pounds before the start of the Israeli military action against Hamas in Gaza in October.
The annual inflation rate in Egyptian cities, which reached 33.7 percent in December, has reached record levels since June.
“During recent developments, the country has been hit hard from various angles and directly to its main revenue sources,” Peter du Preez of Oxford Economics wrote in a note to clients this week.
Last week, Moody’s credit rating agency lowered its outlook on Egypt from “stable” to “negative.”
A three-billion-dollar financial support package from the International Monetary Fund, signed by the two sides in December 2022, faltered after Egypt did not switch, as it pledged, to a flexible exchange rate system and the state’s role in the economy diminished in favor of the private sector. A team from the Fund is currently holding talks in Cairo to discuss completing the package and perhaps expanding it.
The average growth forecast in a Reuters poll of 14 economists was 3.5 percent at the end of the fiscal year that began on July 1, down from previous expectations for the same year of 3.9 percent in October and 4.2 percent in July.
The latest survey showed that growth will rise to 4.15 percent in the next fiscal year 2024-25, although expectations were lower than the 4.50 percent that analysts expected only three months ago.
According to Central Bank data last month, the Egyptian economy slowed down, recording 2.9 percent growth in the second quarter of 2023, compared to a 3.9 percent growth rate in the first quarter.
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2024-01-24 12:10:34
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