Devaluation hits Cairo imports

14 March 2003
The government has decided to freeze state imports for three months with the exception of basic food items, citing the weakening of the Egyptian pound and a continued shortage of hard currency. In an attempt to prevent the move hitting the poorest sections of the population, Prime Minister Atef Obeid has announced that the price of 15 staple food products will be fixed and producers reimbursed for their losses. A list of the products has yet to be published, but they are expected to include items such as sugar, rice and flour.

The local currency has lost about 20 per cent of its value since flotation in January. Local banks are reporting continued foreign currency shortages and have remained cautious about trading. The black market continues to flourish as a result, offering average rates of about $1=£E 6.75 in early March, compared with commercial bank rates of about $1=£E 5.57. The Central Bank of Egypt has made several attempts to bridge the exchange rate gap, including the provision of $1,200 million in reserves to commercial banks to enable them to offer foreign exchange services to customers rather than hoarding dollars. But banks have also received instructions to limit the amount of hard currency withdrawals clients can make to $10,000 a day (MEED 7:3:03).

The government is attempting to secure $1,000 in development loans from the World Bank. Most of the funds are expected to be poured into the banking system to defend the pound against further devaluation.

Prior to the government announcement, the state-owned Sugar Integrated Industries Company announced on 10 March that it was cancelling a tender for 45,000 tonnes of raw sugar and 25,000 tonnes of refined sugar due to high prices in the international markets. The government cancelled a similar sugar tender in late January.

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