Egypt’s Central Bank has been issuing directive after directive on foreign currency to try to ease the country’s shortage of dollars. It has become the single biggest issue facing the Egyptian economy.

A recent devaluation to E£8.78 to the dollar, raising of dollar deposit limits and exceptional auctions has not eased the crisis. The Egyptian pound is still overvalued by around 15 per cent, according to Reuters’ parallel market surveys, and the scarcity continues.

Cairo has understandably prioritised standards of living in an high-import, consumer-driven economy and avoided painful devaluations as far as possible. But the short-term tactic has stifled economic activity.

The Emirates NBD purchasing managers index, now well into recession territory at 44.5, shows that the hard currency shortage has hit the economy hard, causing job losses. Export activity also fell, putting Egypt’s future flows of foreign exchange at risk.

Many investors and lenders are still waiting for the dollar scarcity and the convertibility risk to ease before they consider committing capital to Egypt.

The strategy laid out at the Egypt Economic Development Conference (EEDC) a year ago projected $200-300bn of investment would be required to boost GDP growth to 7 per cent a year.

The power plants, refineries, petrochemical complexes and all the industry facilitated by these cannot go ahead as long as the currency crisis continues. All major projects require project finance in Egypt, and appetite for long-term debt in Egypt, both locally and internationally, is non-existent.

The most likely outcome at present is that any project not prioritised by development banks and export credit agencies will be indefinitely delayed due to lack of access to project finance, especially in hard currency.

The recent devaluation and the weakening dollar will give Egypt breathing space, but the dollar shortage needs to be resolved or the promise of the EEDC will fall flat.