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The Economy of Egypt

Layla Hamed
21-10-2019
Seif Hamed, a foreign exchange trader at C.I.B (The Commercial Internaional Bank), and think

that the Egyptian pound is a representation of how strong and weak the Egyptian economy is,

both at the same time. What indicates how strong it is the performance, and how frequently this

exchange rate changes .The Central Bank of Egypt decided to let the currency float freely again

in 2016. With this decision the value of the currency plummeted, because the pound the

devaluated by more than 30 percent. A dollar was worth 15.5 Egyptian pounds; however, in

2018, the government announced a reduction in interest rates, which meant to attract investors.

Hamed : “The currency is a representation of the economy, because usually a lower

interest rate or a worse interest rate, if the $1 is worth more in the local currency, this means
that the currency is weakening, which means that the economy is weakening, which means that
the economy is performing worse and that the investors do not believe in this economy anymore;
however, on the no side, because maybe it was doing worse and now it’s doing better, so you
need to look back and see how it performed , so if the economy is very volatile, this means it’s
doing bad” (0:22-0-49) (27 seconds)
The mismanagement of the transitional after the 2011 revolution period revealed the weakness of

the economic situations. The security chaos and the irresponsible statements of the Islamic

political extremist figures resulted in a sharp decline of the tourist income, and the direct

investment flows. With the continuous need of importing the basic commodities and the absence

of any attempt to ban the import of luxury goods or goods with alternative local one, It was

normal that the decline in the foreign exchange resources resulted in a deficit in the balance of

payments, translating immediately the Official international reserves of Egypt's withdraw that

have been used to settle the deficit.

Hamed: “Ever since 2011, which is the Revolution, the economy has been
performing badly quite badly because of the lack of trust, and how bad the government was
manipulating or managing the situation, but the main issue came in early in 2015 when a plane
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full of Russian tourists was bombarded and it was flying out of Sharm El Sheikh, this completely
Egypt’s main source of foreign currency, which is tourism” (1:15 -1:38) (23 seconds)
This incident lead to the central bank using its reserves and this, because it did not have enough

foreign currency, and this lowered the reserves, and this is when the IMF (International

Monetary Fund) came to put a reform program. According to the IMF, the executive board of the

IMF approved a three-year extended arrangement under the Extended Fund Facility for Egypt for

an amount equivalent to 12 billion dollars to support the authorities’ reform program. The EFF-

supported program will help Egypt restore macroeconomic stability and promote inclusive

growth. Policies supported by the program aims to correct external imbalances and restore

competitiveness, place the budget deficit and public debt on a declining path, boost growth and

create jobs while protecting vulnerable groups.

Hamed:” The IMF had a very helpful role in the economy, and they made us do a
lot of structural and economic changes. They made us increase the taxes and decrease the
government expenditure in order to lower the budget deficit, and they also put in rules and they
changed the system of the foreign exchange to make the currency free float, which definitely
weakened the Egyptian pound, but also have the economy in terms of making the markets the
foreign exchange market more liquid.” (1:55- 2:19) (24 seconds)
To conclude, this interview explained how the Egyptian pound can and can’t be a representation

of the economy, and why. Related that with the strength of the economy, and how what

happened to the economy after the 2011 revolution, and the 2015 airplane crisis, which was

related with how the IMF intervened to put in reforms to try and fic the economy. As for the

future, the economy is looking up for a better structural reform, where the private sector

participates more in the economy, and where the Egyptian pound gets stronger year after year.

The more the investors trust Egypt, the better the Egyptian pound will perform

Layla Hassib, A-U-C Radio