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Egypt’s reforms will create jobs, promote social inclusion: WB
The World Bank has welcomed economic and social reform measures carried out by the Egyptian government saying they would help create jobs and revitalize the economy.
In a statement released Friday, the World Bank said that “the package of reforms announced by the government would boost the competitiveness of Egyptian businesses, support export growth, attract new foreign investment, free public resources for priority growth and social programs, and support incomes for the poor and the vulnerable.”
The statement comes a day after the Central Bank of Egypt has floated the local pound and raised interest rates by 300 points, while the petroleum ministry increased the prices of petrol and gas by between 30 and 50 percent.
The World Bank’s country director in Egypt, Asad Alam, said the international financial institution is “pleased with the government’s expansion of the Takaful programme, which already reaches around 4.5 million people in extreme poverty, new investments for job creation in Upper Egypt, as well as through labor intensive works for the youth and for women.”
Egypt’s inbound tourism down 19.5% in FY 2015/16: planning ministry
The number of tourists visiting Egypt during the period June 2016-July 2016 decreased by 19.5 percent compared to the same period a year earlier, The Egyptian Ministry of Planning announced in a statement Friday.
Tourism revenues during the said period also decreased by 28.7 percent compared to the same period last year, the ministry said.
The number of tourists visiting Egypt has witnessed a sharp decline following the crash of a Russian airliner over Sinai in late October. Germany, Italy, Russia, France, and the U.K. are among the states that decided to halt flights to and from Egyptian airports shortly after the crash.
The industry took a further dive following the murder of Italian Cambridge University graduate, Giulio Regeni, whose body was dumped along a highway with signs of torture in Egypt’s Giza governorate in early February.
The number of tourists visiting Egypt in September 2016 decreased by 41 percent compared to the same month last year, according to the Central Agency for Public Mobilization and Statistics (CAPMAS,) Egypt’s official statistical agency.
$10 m sold to Bank Misr since liberalization of exchange rate: chairman
Up to $10 million were sold to Bank Misr in the past two days after a decision to liberalize the exchange rate of the Egyptian pound by the Central Bank of Egypt, Bank Misr Chairman Mohamed al Etreby was quoted by Youm7 Saturday.
Banks in Egypt were open to dollar depositors and sellers over the Friday-Saturday weekend, as per decision by the Central Bank of Egypt.
Hungry for dollars after float, Egyptian banks offer market rates – REUTERS
(REUTERS): Hungry for dollars after the central bank floated the pound on Thursday, Egyptian banks are offering market rates for the greenback as they try to build their reserves before interbank trading begins in earnest next week.
But some bankers warned that a backlog of demand from businesses could revive the black market if the central bank does not inject dollars into the banking system to help smooth the transition to a floating currency.
One of the objectives for abandoning the Egyptian pound’s U.S. dollar peg was to close a black market for dollars that had boomed after the central bank imposed capital controls last year. The pound had slid to a record low of 18 per dollar on the unofficial market last Sunday.
“We bought dollars from the banking system at rates between 14.7 and 16 so it’s already working … We closed the deal for over $1 million and got some of it on Thursday and the rest we are getting on Sunday,” said one commodity trader
“I hope the black market disappears. There’s no reason for it to continue now banks are buying at equilibrium prices.”
Egypt allowed its currency EGP= to fall from 8.8 to the dollar to about 14.65 in a single day on Thursday, ditching the peg that had drained the central bank’s foreign exchange reserves and forced it to ration dollar supplies.
On Thursday, banks sold dollars mostly to businesses, causing confusion among ordinary customers. Though banks were open to dollar depositors and sellers over the Friday-Saturday weekend, no dollars were on offer to retail clients.
The central bank began Thursday’s dramatic move by devaluing the pound to 13 per dollar before allowing it to slide further in a $100 million sale and ditching the peg.
Banks will begin freely trading currency on the interbank system from Sunday.
Some bankers were disappointed the central bank had not flooded the system with hard currency to help stabilize the pound in the early weeks of trade, saying the black market will return if banks are unable to meet pent-up demand from businesses.
Black market traders said they were offering dollars on Friday for 16.75-16.95 pounds and buying for 16.25-16.30, though volumes were low.
“If the central bank didn’t inject enough dollars for the banks to start selling at a higher rate, like in the 20s even, then the black market will be back to cover people’s demands,” said another commodity trader.
“Either way this depends on the IMF loan because the liquidity of dollars in the central bank is not enough.”
Egypt reached a preliminary deal with the International Monetary Fund in August for a $12 billion loan program, but has yet to win final approval.
The IMF has welcomed the float. Its Egypt Mission Chief Chris Jarvis said the loan would go to the board in weeks.
Most bankers and traders interviewed did not see the black market returning as long as the central bank resists any temptation to intervene and lets the market clear via the banks.
Allen Sandeep, head of research at Naeem Brokerage, said the central bank had allowed the pound to depreciate to entice the dollars currently held outside the banks back into the system.
Able to get twice as much for them on the black market, Egyptians refused to sell dollars at the bank before the float.
“It makes sense for them to keep it weak for now as their only source for dollars… is people coming in and depositing. Those are the main flows until portfolio investors and tourists come back but this could take months,” he said.
Egypt has struggled to attract dollar inflows since the 2011 uprising drove off tourists and foreign investors, key hard currency earners. It hopes the float will restore confidence.
But it was not clear how many dollars had flowed into the formal banking system since the float. Several banks said trade was slow.
“No one came to sell us dollars all day. Yesterday people during normal working hours sold us dollars, but not a lot. The total was like $20,000,” one bank source said on Friday.
From float to subsidy cuts, Egypt says no time to delay reforms
(REUTERS): A day after dramatically ditching its currency peg and hiking fuel prices, Egypt’s government scrambled to assure people angered by rising prices that it could no longer afford to postpone painful austerity measures.
Flanked by his finance, supply, petroleum, trade, and social solidarity ministers, Prime Minister Sherif Ismail told a news conference there was no going back on reforms that Egypt hopes will help it clinch a $12 billion IMF loan program.
“Yesterday was an important day in the history of the Egyptian economy, with the moves in foreign currency and petroleum prices,” Ismail said. He said further cuts to fuel subsidies were on the way.
“The luxury of delay is not available. It may have been available in previous decades but today we cannot afford such painkillers.”
Egypt floated its currency on Thursday, allowing it to fall from its previous peg of 8.8 to the dollar to about 14.65 in a single day, and said it would make a final push to secure the three-year IMF program within days.
In another step toward securing the IMF cash, the government later announced 30-47 percent increases in fuel prices, adding to the shock on the street as people saw their salaries drop and costs soar in the space of a day.
Long lines formed at petrol stations following the announcement, which left Egyptians with about two hours to fill up their tanks before the new prices kicked in.
Some taxi drivers refused to switch on their meters and demanded fares of 50 pounds for trips that usually cost seven.
“We are being raped, mister,” one man shouted in anger as he waited to refuel in Cairo.
At the offices of a startup in downtown Cairo, the small team looked despondent as news of the flotation trickled in.
“My savings have halved overnight,” said one employee.
DANGERS OF DELAY
Welcomed as necessary by business and many economists, Egypt’s currency reforms carry enormous risks for President Abdel Fattah al-Sisi, who seized power in mid-2013 promising to restore stability after a year of divisive Islamist rule.
Egypt has struggled to attract dollars and revive the economy since the 2011 uprising drove away tourists and foreign investors, key sources of hard currency.
Since taking power, the general-turned-president has struggled to transform tens of billions of dollars of aid from Gulf Arab allies into sustainable growth for a weary populace.
With a budget deficit of 12 percent, Egypt reached a preliminary deal with the International Monetary Fund in August, but has yet to win final approval.
Unlike previous governments, which shied away for decades from politically sensitive measures, Sisi’s government had slashed electricity subsidies and imposed a Value Added Tax even before the latest moves.
Among other measures announced on Friday was an end to tariffs on private sector imports of basic commodities, including a 20 percent duty on white sugar, after nationwide sugar shortages.
The government insists it will protect the poor. It said Egypt’s subsidy bill would actually rise to 49 billion pounds this fiscal year after the government boosted food subsidies, on which 71 million rely.
Under the new rules, banks will begin trading currency on the interbank system on Sunday. Branches were open on Friday but customers said they were unable to obtain dollars.
One of the objectives of abandoning the currency peg was to end a black market for dollars that had boomed after the dollar-starved central bank imposed capital controls early last year. The pound hit a record low on Sunday of 18 per dollar.
Black market traders said they were offering dollars on Friday for about 16.75-16.95 pounds and buying for 16.25-16.30, but volumes were low as many waited for markets to settle.
USD exchange rate reaches 15 EGP
The USD exchange rate has reached 15 EGP for purchase against the Egyptian Pound, after it has been stable over the past weeks at 8.88 EGP, according to the National Bank of Egypt (NBE.)
The government has announced floating the Egyptian pound in a bid to flourish the economy and meet IMF’s requests.
The rate has reached 15.3 EGP for sale. Euro exchange rate reached 16.71 EGP for purchase and 17.05 EGP for sale.