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Monday, 31 October 2016

House and government divided on devaluation

House Econ committee calls for Amer, El Garhy to testify. We begin in the House of Representatives, where the Economics Committee has called for CBE Governor Tarek Amer and Finance Minister Amr El Garhy to appear to outline their views on how to tackle the currency crisis, Al Borsa reports. That comes as the economics committee and the budget committee are reportedly divided on whether a devaluation is the best course of action. The budget committee’s Yasser Omar is notably against the move, saying Egypt does not have the export base it needs to generate USD liquidity. Other MPs are calling for any devaluation to be matched by an increase in subsidies and social welfare payouts.

Officials (unnamed, of course) from the ministries of electricity and petroleum are telling the press that devaluation would be disastrous. An unnamed Oil Ministry official states that there is barely enough liquidity to meet its monthly import bills of USD 720 mn, adding that there’s no way to raise petroleum product prices enough to cover the impact of devaluation and more subsidy payouts. The former head of the Egyptian Electric Utility & Consumer Protection Regulatory Agency is stating that a devaluation would make costly debt service on the massive loans the ministry took out for its projects worse.

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