Egypt says happy with im­pact of cur­rency float; in­flows surg­ing Plan to cut pri­mary bud­get deficit still on track

Kuwait Times - - BUSINESS -

DUBAI: Egyp­tian au­thor­i­ties are happy with fi­nan­cial mar­ket move­ments since they floated the pound, and in­flows of for­eign ex­change into the bank­ing sys­tem are surg­ing, deputy fi­nance min­is­ter Ahmed Kou­chouk said yes­ter­day. The Egyp­tian pound fell to near 18 to the US dol­lar after its peg of 8.8 was scrapped on Nov 3 in an ef­fort to lure more for­eign in­vest­ment and shut a black mar­ket in dol­lars. In the last few days it has be­come more sta­ble at around 15.50.

Kou­chouk, speak­ing to a small group of for­eign re­porters at a fi­nan­cial con­fer­ence in Dubai, said volatil­ity was nat­u­ral after a cur­rency float and the pound’s moves were “not a sur­prise or con­cern”. “Banks are com­pet­ing, we are see­ing that rates are fluc­tu­at­ing, each bank has its own buy­ing and sell­ing rate - all the in­gre­di­ents of a flex­i­ble, ef­fi­cient sys­tem are there now,” said Kou­chouk, an ar­chi­tect of Egypt’s eco­nomic re­form plan.

He de­scribed the cen­tral bank as “very happy with what’s hap­pen­ing”. Data from the cen­tral bank shows Egypt’s bank­ing sys­tem has re­ceived about $1.5 bil­lion in net hard cur­rency in­flows since the float, around 10 to 15 times the level of weekly in­flows be­fore the pound was freed, Kou­chouk said. He called that num­ber en­cour­ag­ing and pre­dicted in­flows would in­crease fur­ther. For­eign hold­ings of govern­ment se­cu­ri­ties in­clud­ing Trea­sury bills and bonds - have in­creased by be­tween $700 mil­lion and $900 mil­lion since the float, Kou­chouk es­ti­mated. Some of that rise is due to for­eign money that was al­ready in­side Egypt but some is due to new money from abroad, he said.

As part of its ef­fort to ob­tain more hard cur­rency, Egypt plans to re­turn to the Eurobond mar­ket. Au­thor­i­ties ex­pect to make a de­ci­sion early next week on when they will hold in­vestor road­shows for the first is­sue, Kou­chouk said. He de­clined to give a num­ber for the size of the debt sale, say­ing it would de­pend on mar­ket con­di­tions given re­cent volatil­ity in global fixed in­come prices. The pound’s de­pre­ci­a­tion prom­ises to raise the govern­ment’s costs for im­port­ing wheat and en­ergy, po­ten­tially slow­ing its drive to cut a bud­get deficit that to­taled 12.2 per­cent of gross do­mes­tic prod­uct in the last fis­cal year through June.

But Kou­chouk said the de­pre­ci­a­tion would also help govern­ment rev­enues by in­flat­ing some pay­ments such as Suez Canal rev­enues, and that its fis­cal re­forms had in­cor­po­rated ex­pec­ta­tions for de­pre­ci­a­tion. For these rea­sons a weaker pound will not have a big im­pact on state fi­nances and the govern­ment is still on track to cut its pri­mary bud­get deficit, which ex­cludes in­ter­est pay­ments, by about two-thirds in the cur­rent fis­cal year from last year’s 3.4 per­cent of GDP, and to elim­i­nate it next year, he said.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.