The government is anxious to secure fresh capital inflows to keep the local market adequately supplied with foreign exchange, and thereby avoid the need for further devaluation. The local currency has depreciated by about 24 per cent over the past 18 months. The most recent fall came about with the 12 December devaluation to a new central exchange rate of $1=£E 4.50 (MEED 21:12:01).
The overall balance of payments showed a surplus of $575 million in the first quarter of 2001/02 (July-September), after cumulative deficits of almost $6,000 million since the start of 1998/99. However, the surplus only came about because of the inflow of $1,500 million following the mid-2001 Eurobond issue. The current account has been roughly in balance since the start of 2000/01. However, the expected loss of some $2,000 million in tourism income during 2001/02 is expected to result in a heavy deficit in the current fiscal year. The government is seeking the fresh aid to finance that anticipated deficit (MEED 28:12:01).
The new exchange rate has come under some pressure, despite the efforts of the government and the Central Bank of Egypt to ensure adequate liquidity in both local and foreign currency. Central bank governor Mahmoud Abul-Ayoun has accused exchange bureaux of undermining the system, and a number of these bureaux have had their licences suspended. ‘The message I would like to convey is that any wrong or unlawful practices in the foreign exchange market will be confronted with determination and severity,’ he told the Cairo daily, Al-Ahram, on 6 January. ‘The exchange bureaux must believe that they are being watched.The present exchange rate system allows everyone to profit, but it does not allow profiteering at the expense of the Egyptian economy.’