Egypt has begun devaluing its currency to help revive the economy and meet the conditions of an expected IMF loan and the depreciation has further to go, a business leader in the ruling Muslim Brotherhood said on Sunday.
Hassan Malek, chairman of the Egypt Business Development Association and a senior informal adviser to President Mohamed Morsi, told Reuters the government had begun steps to cut the budget deficit and stabilize the country’s finances, but tougher measures would have to wait until after parliamentary elections expected in April.
“We have started already some increase in taxation, and there is the devaluation of the pound and we raised some prices of petrol and gas,” Malek said in an interview.
“Normal people in the street now understand that there is a price that we will have to pay for the IMF agreement.”
Asked whether he expected a further depreciation of the Egyptian currency to help exports and tourism, he said: “I’m not of course a technical (expert) but people expect a little bit of devaluation in the future.”
Malek stressed he was speaking in a personal capacity and not on behalf of the government or the governing Islamist Freedom and Justice Party.
The Egyptian pound has lost some 8 percent against the dollar since the start of the year and a black market has sprung up with the local currency being traded at more than 7 pounds to the dollar, compared to an official rate of 6.73.
Foreign exchange bureaux are overwhelmed by demand for dollars which are in short supply due to political turmoil.
Malek said the economy was going through a very difficult period because the transition to democracy launched by the 2011 uprising that toppled former President Hosni Mubarak was not yet complete and institutions were not working fully.
“ECONOMY WON’T COLLAPSE”
Political turmoil has severely hit tourism, a major foreign currency earner, and many wealthy Egyptians are keeping their money abroad rather than investing in their country.
“The Egyptian economy is not going to collapse,” he said. “The real problem is the delay in building constitutional democratic institutions. That’s why the present government feels it is temporary and of course we know we are in a transitional period.”
Malek said he hoped Egypt could conclude a long-delayed $4.8 billion loan agreement with the International Monetary Fund before the election, although sensitive measures such as cuts in subsidies should be implemented gradually.
Reuters
