‘The monetary policy is fixed and will not change for the interests of the country,’ El-Okdah said on 1 December, although he also indicated the central bank will introduce ‘specific controls’ to regulate the exchange market. As of early December there was still a major disparity between official commercial bank rates of about $1=£E 6.15 and black market rates of as much as $1=£E 7. The central bank has come under fire from some quarters for failing to eliminate the parallel market (MEED 28:11:03).

Rating agency Fitchon 2 December downgraded the outlook on Egypt’s long-term local currency BBB rating to negative from stable, citing a ‘deterioration in public finances’, rising domestic debt and government intervention in the nominally free exchange rate system.

‘The main issue is that monetary policy has been subsumed to growth, and by keeping interest rates low to contain borrowing costs they have helped to keep the pound weak,’ says a local banker. ‘They started loosening monetary policy far too early, and at the same time made some ill-judged moves to intervene in the market. But the fundamentals of the economy are looking much better, and the new governor will be coming in as reserves are increasing, which should give him some extra weaponry.’

The central bank on 1 September introduced a fund intended to instil confidence in foreign portfolio investors by streamlining the process of repatriating money earned on the local market. The fund recorded a net surplus of $20.9 million for the three months ending 30 November, while total inflows of foreign currency through the fund reached $105.3 million.