Egyptian Pound Rebounds, with the State's Help
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March 5, 2017 19 Economy Egyptian pound Briefs Saudi Arabia wants rebounds, with oil prices to rise to the state’s help about $60 Saudi Arabia wants crude oil prices to rise to around $60 a barrel Ahmed Megahid the International Monetary Fund this year, five sources from Organi- (IMF). sation of the Petroleum Exporting A short time after the flotation, Countries (OPEC) members and the Cairo the black market shrivelled up, for- oil industry said. eign currency reserves rose from This is the level the Saudis and gypt’s monetary policy- $19.6 billion in November to $26.2 their Gulf allies say would encour- makers are playing a dan- billion in January and Egypt got age investment in new fields but not gerous game to rein in the $2.75 billion as the first part of the lead to a jump in US shale output, runaway fall of the Egyp- IMF loan. the sources said. tian pound against the US As of February, however, the ex- OPEC, Russia and other producers Edollar, triggering fears their efforts change rate of the US dollar had pledged last year to cut production will backfire, analysts said. come down to 15 pounds to the dol- by about 1.8 million barrels per day The Egyptian Central Bank has lar. (bpd) from January 1st. The cut is been using foreign currency re- Authorities called this a gradual intended to boost prices and get rid serves to make dollars available at recovery of the national currency, of a supply glut. the banks and control the exchange citing economic reforms and the Crude prices have risen by more rate, financial analysts said. availability of dollars. The falling than 14% since the November pact “This is very dangerous because, dollar created a stampede of dollar and are trading at about $56 a barrel. among other things, such a policy hoarders at the banks, who wanted OPEC officials have repeatedly will bring us back to square one,” to exchange their dollars for Egyp- said the group does not target a spe- said financial analyst Wael el-Na- tian pounds. cific oil price and their focus is on has. “By using foreign currency The banks bought $800 million Controlling the exchange rate. Egypt’s Central Bank at downtown drawing global oil inventories and reserves to put the exchange rate from Egyptians over three days in Cairo. (Reuters) helping the market to rebalance. of the US dollar under control, the mid-February and the dollar ex- (Reuters) Central Bank is backpedalling on change rate keeps falling. its decision to free float the na- This, however, is far from a re- such a move “will eat away at the only when foreign currency rev- tional currency and this will have covery, Nahas said. The Central reserves and bring the foreign cur- enues pick up. IMF says sanctions adverse ramifications.” Bank is using the dollars it collect- rency black market back to life”. “Egypt imports almost 80% of its on Iran dampening ed in the months that followed the The Central Bank said its decision needs from other countries, which pound flotation to buy dollars from to free float the pound was final and means that there will always be economic sentiment This is very citizens at a low rate, he said. it would not go back to the decades- pressure on foreign currency re- dangerous because Nahas calculated the $12.5 billion old controlled foreign currency ex- serves and subsequently a high US Uncertainty surrounding sanc- such a policy will that entered the Egyptian Treasury change rate regime. dollar exchange rate,” said Alia el- tions on Iran and its relations with bring us back to in the past three months included “We do not interfere to decide Mahdi, an economics professor at the United States pose a risk to the $2.8 billion in a currency swap deal the exchange rate of foreign cur- Cairo University. “This is particu- oil-producing nation’s economy, the square one. with China, the first tranche of the rencies,” Central Bank Governor larly true as foreign currency earn- International Monetary Fund said. Wael al-Nahas, ” IMF loan, $2 billion from the sale of Tarek Amer told the private DMC ers remain the same.” The comments were a reference financial analyst Treasury bonds at the Irish Stock network. “We cannot interfere be- Tourism revenues, at $14 billion to sanctions the Trump admin- Exchange, $1 billion from the World cause we want to create a balance in 2010, totalled only $5.6 billion istration imposed on individuals Bank, $500 million from the Afri- in the market.” in 2016. Revenues from the Suez and companies supporting Iran’s Soon after the Central Bank free- can Development Bank and $4 bil- Cabinet spokesman Ashraf Sultan Canal have declined. Exports, es- ballistic missile programme and floated the pound on November lion from the sale of Eurobonds at attributed the rise in the exchange pecially agricultural ones, have the Islamic Revolutionary Guards 3rd, the exchange rate of the dol- the Luxembourg Stock Exchange. rate of the Egyptian pound to re- risen 17% in the past three months Corps. lar shot up from 8.88 pounds to 19 Thus, Egypt’s foreign currency forms initiated by the government. but economists say the rise is The measures came after Iran pounds, which more than doubled reserves should have increased to “We even expect the value of not enough to bring in enough dol- tested a medium-range missile, Egypt’s import bill and raised com- $32 billion from $19.5 billion in No- the pound to increase in the future lars. which the White House contends modity prices to unprecedented vember. Nonetheless, the Central when exports rise, imports de- “This means that there was noth- violated a UN Security Council levels. Bank in January said foreign cur- crease, foreign tourists come back ing new to justify the decline in the resolution proscribing missiles that The pound flotation was among rency reserves were $26.2 billion. and international trade improves, exchange rate of the US currency,” could carry a nuclear device. economic reforms aimed at eradi- “This means that the Central which will reflect positively on rev- Mahdi said. “We need to attract in- The IMF’s annual report on Iran’s cating a rampant foreign currency Bank had used the missing $5.8 enues from the Suez Canal,” he said vestments, raise exports and bring economy, known as the Article IV black market, boosting foreign billion to create a greenback offer in a telephone interview. the tourists back to get enough dol- review, said “renewed uncertainty currency reserves and winning ap- to reduce its exchange rate against Nevertheless, experts argue that lars for a strengthening of our na- regarding sanctions is dampening proval for a $12 billion loan from the pound,” Nahas said, adding that the Egyptian pound will pick up tional currency.” sentiment”. Jafar Mojarrad, IMF executive di- rector for Iran, noted: “Regrettably, remaining US sanctions and related Tunisia facing uphill battle to curb poverty, unemployment uncertainty have hindered the return of global banks to the Iranian Stephen Quillen ble to meet, although not very easy, lack of jobs sparked violent protests countries in the region in terms of market and continue to hamper what is more important is to see an across the country, leading the gov- women’s rights large-scale investment and trade.” increase in real individual income ernment to impose a nationwide However, why so many women in (Agence France Presse) Tunis taking into account the rise in the night-time curfew for almost two the country are unable to find work rate of inflation. This translates into weeks. is an enigma. fter years of economic purchasing power,” he said. The renewed focus on economic Experts said the problem has Iraq’s Kurdistan decline, Tunisia is ramp- “In terms of employment, I would development has also shed light on more to do with cultural norms negotiates new oil ing up efforts to deal not count on the 400,000 new jobs the plight of young Tunisian wom- than economics. with long-standing is- that the government is targeting. en, who like most others their age “Female graduates prefer to get terms sues of poverty and un- This also depends on the nature in the Arab world, face dispropor- married first and then consider ca- employment,A which analysts said of these jobs. Are they permanent tionately high rates of unemploy- reer options,” said Olfa Touati, a Iraq’s Kurdistan has increased the have laid fertile ground for jihadist jobs?” ment despite often being highly project manager for the Association loans guaranteed by future oil sales to activity and illegal migration. That question resonates with educated. of Women’s Training and Employ- $3 billion in deals with trading houses In November, officials presented many of the country’s unemployed In late 2016, female unemploy- ment in El Kef. She said traditional and Russian state oil firm Rosneft a 5-year development plan that in- — 15.6% of the workforce — who ment in Tunisia was nearly double values sometimes prevent women aimed at strengthening its fiscal posi- cluded several ambitious reforms: have become frustrated by what that of men — 23.5% compared to from participating in the labour tion as the semi-autonomous region A target growth rate of 4% per year they perceived as government ne- 12.4% data from the National In- force. fights the Islamic State (ISIS). (later revised to 3.7%), dozens of glect during years of economic tur- stitute of Statistics indicate — and “Generally, the issue of unem- Kurdistan Natural Sources Min- infrastructure and education-re- moil.