By Hossam Mounier
The price of the US dollar against the Egyptian pound stabilised on Monday after witnessing two consecutive increases on Thursday and Sunday, during which it increased by 20 piasters. The dollar price at the Central Bank of Egypt (CBE) reached EGP 7.7301, while the bid price in banks stands at EGP 7.78, with the asking price standing at EGP 7.8301.
The market is waiting in anticipation of the CBE’s next step regarding the dollar on Tuesday, through the bidding to be offered by the CBE to sell dollars to public banks in the Egyptian market. The dollar price at CBE is determined during the bidding process, thus affecting the dollar price in the whole market.
The CBE offers three biddings for the sale of dollars to banks every Sunday, Tuesday, and Thursday.
CBE Governor Hisham Ramez explained, in a phone call to a television programme, that the CBE is monitoring the economic situation in Europe and what’s happening in Greece.
He added that the difficult conditions in Greece will make the upcoming period tough for Europe, and that commodity prices in Europe are expected to decrease. He added that this will vigorously increase import operations which affects production in Egypt.
“I expect consecutive waves of increase in dollar prices over the next days, maybe accompanied by sale of foreign currency by the CBE at reasonable prices to meet strategic needs,” according to Mohamed Abdel Aal, Deputy Chairman of the Arab Sudanese Bank and board member at the Suez Canal Bank.
Abdel Aal added that the rise in the dollar exchange rate of 20 piasters in less than a week, to stand at EGP 8.73, reflects CBE’s clear vision to adopt a flexible exchange rate. These policies comply with the requirement for the monetary and financial policy as well as the current economic conditions.
“In my opinion, the current rise in the dollar exchange rate is just the beginning of a series of other consecutive increases, until it reaches a price that creates the balance needed. This policy will be hugely attacked, because the decrease in the currency value will of course increase inflation pressure and keep the increase in commodity and production input prices. We must look at the policy from a positive side to see its effects,” said Abdel Aal.
Abdel Aal added that as a state, we must be able to withstand austerity if we really want to achieve economic growth and avoid loans and the threat of bankruptcy.
He added that increasing the dollar exchange rate to even EGP 8 is not supposed to have an immediate effect on commodity prices, as most importers have been pricing their goods at EGP 8.25 to the dollar to cover currency risks.
Abdel Aal confirmed that if all businessmen in all fields (whether economic, trading, or production sectors) are committed to not increasing the price of the dollar and burdening the consumer, there would be no inflation pressure.
“This would only occur if businessmen lowered their profit margins which would ease the burden of potential inflation pressure. This is a national demand at this phase,” says Abdel Aal.
He said this rise in the dollar exchange rate could definitely decrease imports especially for luxury commodities. This would improve the competitive ability for local goods and encourage tourism. It would also increase direct foreign investment.