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Monday, 4 July 2016

Tarek Amer talks to media, criticises previous FX policies

Holding the EGP at a specific exchange rate in the past was a “big mistake,” CBE Governor Tarek Amer told a number of Egyptian newspapers including Al Mal, Al Ahram, and Al Shorouk. Implicitly attacking former governors Hesham Ramez’s and Farouk El Okda’s policies, he said the FX policy “in the last five years” cost the state’s coffers bns of USD and indirectly subsidised all citizens, “including the rich… The central bank received USD 22.5 bn in deposits and financial support … wasted it on the FX market … [and which] should have been used to fix monetary policy.” Amer says his policy from day one was to support economic growth and productivity, while preserving an exchange rate that somewhat reflected real demand and supply. Bloomberg has coverage in English.

We had a choice, either to preserve the EGP’s stability or to “make factories work.” Steel producers were working at 20% capacity as controlling the the FX rate meant the CBE also had to curb foreign currency demand, Amer says. Now the producers are utilising 70-80% of their capacities. Amer also said the CBE is preparing a new banking law that would nudge banks to support economic growth further still and increase the utilisation rate of their funds.

Egypt has not asked the IMF for funding, but it is an option the country could resort to as a member, Amer notes, “but we do not accept any interference with domestic policy.” He added that Egypt’s debt levels are close to “dangerous levels,” but the central bank is embarking on a reform programme with the government.

40% of Arab African International Bank’s share and 20-30% of Banque du Caire’s will be floated on the EGX by year’s end or the beginning of 2017 at the latest, Amer said. United Bank of Egypt, on the other hand, will be marketed to a strategic investor and already a number of GCC-based suitors are lined up.

… Although the CBE respects the court verdict that annulled its decision to limit the tenures of private bank managing directors, Amer says the CBE will handle bank board of directors’ term renewals on a case-by-case basis. The central bank will decide “who is fit to continue and who is not,” Amer explained.

“I will take full responsibility for my decisions … I will never be happy when the FX rate is stable but factories are not working … people need to know we are going through a challenging period,” Amer said.

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