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Thursday, 5 May 2016

Top presidential economic advisor says no need for devaluation; CBE reserves at highest level in eight months, EGP continues to fall

Devaluation won’t solve the FX crisis -Top advisor to El Sisi: The FX crisis cannot be resolved through devaluation, said Abla Abdel-Latif (CV, pdf), head of the President’s Council of Economic Advisors, in an interview with Khairy Ramadan on his CBC talk show Momken. The focus instead should be on developing industry and scoping out new sources for foreign currency, Abdel-Latif added. (Watch, starting at the 1:06:01 mark.)

…the comments came as the Central Bank of Egypt reported that its foreign reserves rose to their highest levels in eight months, registering USD 17.0 bn at the end of April, up from USD 16.6 bn a month earlier. The increase came through a USD 408 mn rise in the CBE’s foreign currency holdings. Bloomberg has coverage in English and the CBE data can be accessed here.

…Still, the EGP continued to slide as greenbacks were trading at EGP 11.10 per USD 1 on the parallel market yesterday, according to Al Shorouk. The continued drop in EGP and increased scarcity of USD domestically reminded us of one of the most ingenious Egyptian P2P solutions, which sprung to life in 2013 and has faded away gradually since then.

CBE Governor Tarek Amer confirmed that the CBE has yet to receive new FX deposits since he took the helm last November, attributing the rise in FX reserves to the CBE’s “policies,” Al Mal reports.

…veteran finance writer Patrick Werr says the argument that the EGP is sliding because FX bureaus are speculating against it does not hold water. “Speculators make money only if their underlying bet comes true.” Werr believes FX bureaus play an important role in the economy — like them or loathe them, the market needs them.

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