Egypt in­dus­tri­al­ists urge tighter im­ports reg­u­la­tion

An at­tempt to ease de­mand for dol­lars; cur­rency cri­sis eases

Kuwait Times - - BUSINESS -

CAIRO: Egypt’s in­dus­trial fed­er­a­tion has called for tighter reg­u­la­tions on im­ports in an at­tempt to ease de­mand for dol­lars and pre­vent a re­peat of the cur­rency cri­sis that has seen goods pile up at ports this year. Mo­hamed El Sewedy, head of the Fed­er­a­tion of Egyp­tian In­dus­tries, said the dol­lar crunch had hit man­u­fac­tur­ing, with raw ma­te­ri­als held up at ports due to a lack of for­eign cur­rency. Man­u­fac­tur­ing growth fell to 0.2 per­cent in the first nine months from 9 per­cent in the same pe­riod of 2014.

Goods were fi­nally re­leased this month af­ter state banks sup­plied $1.8 bil­lion to clear the back­log and process new let­ters of credit, El Sewedy said. “All the goods that were held up have left the ports now,” El Sewedy told Reuters in an in­ter­view. Egypt, which de­pends on im­ports, has faced eco­nomic tur­moil since the 2011 up­ris­ing that ended Hosni Mubarak’s 30year rule. For­eign in­vestors and tourists, on which the coun­try re­lies for for­eign cur­rency earn­ings, have stayed away.

The coun­try’s for­eign cur­rency re­serves have fallen from $36 bil­lion be­fore the 2011 re­volt to about $16.4 bil­lion in Oc­to­ber, leav­ing the cen­tral bank with lit­tle fire­power to de­fend the Egyp­tian pound from mount­ing pres­sure. In Fe­bru­ary, the out­go­ing cen­tral bank gov­er­nor im­posed re­stric­tions on the amount of dol­lars com­pa­nies could de­posit in banks. The aim was to crush the dol­lar black mar­ket but it made it dif­fi­cult for com­pa­nies to open let­ters of credit. Speak­ing at his of­fice over­look­ing the Nile, El Sewedy said the in­com­ing cen­tral bank gov­er­nor, Tarek Amer, had met with in­dus­tri­al­ists and promised to change course. “The di­rec­tion is to­wards a pol­icy that guar­an­tees or­derly mar­kets with­out stran­gling the man­u­fac­tur­ing sec­tor and forc­ing some man­u­fac­tur­ers to re­sort to il­le­git­i­mate means to ob­tain their (dol­lar) needs,” El Sewedy said. He said Amer had promised to help banks close $4 bil­lion in dol­lar over­drafts opened for clients dur­ing the cri­sis. About $1 bil­lion of this was sup­plied last week and El Sewedy said he ex­pected the re­main­der to come very soon.

The cen­tral bank has not made any state­ment on its shift­ing mon­e­tary pol­icy or said where the dol­lar sup­plies were com­ing from. Amer of­fi­cially be­gins his new role on Nov. 27 but is widely be­lieved by bankers to be work­ing be­hind the scenes. As pres­sure mounts on the cen­tral bank to de­value, El Sewedy said a freer ex­change rate would help en­sure bal­anced mar­kets. “The more the rate is fair and free, the more we are able to com­pete,” he said. Egypt is in­creas­ingly ex­pected to shift to a more flex­i­ble ex­change sys­tem, as rec­om­mended by the In­ter­na­tional Mon­e­tary Fund in Septem­ber and fa­vored by many banks and busi­nesses. Un­der the out­go­ing gov­er­nor, the cen­tral bank has al­lowed small and piece­meal de­val­u­a­tions as the pound came un­der pres­sure, but the last move-un­ex­pect­edly-was to strengthen the cur­rency.

El Sewedy said man­u­fac­tur­ers were push­ing for stricter reg­u­la­tions to en­sure im­porters do not put ar­ti­fi­cially low val­ues on cus­toms bills to avoid du­ties. The prac­tice is be­lieved to be wide­spread, rob­bing the gov­ern­ment of pre­cious tax rev­enues while making it dif­fi­cult for lo­cal prod­ucts to com­pete on price. “If I reg­u­late trade, the ap­petite for dol­lars ... will be re­duced and be­come more or­derly,” said El Sewedy. “There is en­thu­si­asm from the gov­ern­ment and op­po­si­tion from many peo­ple who are ben­e­fit­ing. We are fight­ing ... We will have stan­dard­ized im­ports be­fore the end of 2015.” — Reuters

SRINAGAR: A Kash­miri la­borer car­ries a sack filled with card­board at a busy mar­ket in Srinagar, In­dia. — AP (See Page 26)

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