Egypt Denies Dollar Shortage amid False Exchange Rate Allegations

The Egyptian Cabinet denied allegations and claims that are being promoted regarding the exchange rate of the pound and the allegation of a shortage of dollars in Egypt.

In today's report, the cabinet indicated that Egypt has recently adopted a flexible exchange rate policy, which is the most appropriate policy in the case of economies open to the outside world that adopt an independent monetary policy.

The report added that this policy contributes to increasing the level of exports due to their increased competitiveness, and reducing the attractiveness of imports, due to their high prices, especially when production structures are flexible.

The report stated that, in conjunction with the implementation of this policy, the government adopted several measures aimed at increasing the levels of agricultural and industrial production to reduce the levels of vulnerability of the Egyptian citizen from the impact of the price hikes resulting from the liberalization of the exchange rate, which has proven to be very successful in increasing production levels of some agricultural and industrial commodities recently, and in increasing the rates of supply of the main agricultural crops, especially wheat.

The report indicated that this flexible exchange rate policy is one of the pillars supporting the inflation targeting policy adopted by the Central Bank of Egypt (CBE) to achieve price stability and contain inflation rates at low levels that do not harm consumers and investors.

It continued: “The effect of changes in the exchange rate to local prices is usually temporary, and reaches its peak in the wake of adopting flexible exchange rate policies, then begins to gradually recede, which is what the Egyptian economy witnessed in the wake of the previous wave of exchange rate liberalization within the framework of the reform program that was adopted in 2016".

"The government is adopting packages of structural reforms within the framework of the national program for economic and social reform to counter the expected impact of the flexibility of the exchange rate on goods and services, which would reduce price levels and create more job opportunities (6 reform axes, 32 policies and goals, and 88 priority structural, procedural and legislative reforms out of a total of 310 reform measures).

The Cabinet report stated that the CBE pumps dollar liquidity continuously to release the accumulated goods in the ports, and gives priority to basic commodities and production components to ensure that the production process does not stop, in addition to what has been done of forming a working group from the “Central Bank and the Ministry of Finance to determine the dollar gap for the fiscal year 2022/23 and developing different scenarios for how to bridge the dollar gap in the budget, in addition to issuing a set of directives for a number of ministries with the aim of rationalizing dollar spending.

With regard to total foreign currency flows into Egypt, and how to bridge the dollar gap, the cabinet report indicated that the government periodically follows up the position of foreign exchange resources and uses in coordination with the CBE with the aim of reducing the dollar gap and ensuring the provision of foreign exchange necessary to meet the basic needs of the Egyptian economy.