In an interview with Daily News Egypt, chairperson of the Industrial Development and Workers Bank of Egypt (IDWBE) Maged Fahmy said that the state has to work to increase its foreign exchange (FX) resources to stabilise the exchange market and curb the volatility in rates.
Fahmy also noted that the state has not been working to increase its FX reserves; hence, it is depending on flotation, which cannot alone realise the set goals.
The price of the pound has seen sharp fluctuations since the flotation on 3 November 2016.
He noted that the exchange rate is determined by supply and demand, explaining that increasing sources of hard cash is the only way to curb market volatility.
Moreover, Fahmy said that increasing the resources of foreign currencies is only achievable if all state agencies work efficiently for that goal, adding that before January 2011, state resources of hard cash were effective. “Until we reach that level again, I believe we will continue to have the same problem,” he stressed.
He noted that there are signs the Egyptian economy is recovering, especially with the positive changes in the international position towards Egypt—along with the finding of the Zohr natural gas field and the bold political will that seeks reform. Yet, he pointed out that problems will not solve themselves while Egyptians sit and wait.
He stressed that no president comes with a magic wand to set things right overnight.
“Yes, we do have problems, but we started facing them,” Fahmy said. “I’m very optimistic about the future.”
He added that the flotation decision was very important to eliminate the black market, which hindered the inflow of foreign investments, alluding to the need of increasing FX resources.
Fahmy said that attracting hard cash through tourism, exports, or foreign investments alone won’t work. “Increasing the state income of foreign currency did not rely solely on the exchange rate,” he argued.
He explained that tourism was very active, and foreign investments were pouring into the Egyptian market before the 25 January Revolution, while the exchange rate was stable at EGP 5.25 to the dollar, noting that attracting more resources needs more efforts.
Tourism, as a main source of hard cash, requires more efforts to recover and make better results, through opening new markets and promoting it abroad, according to Fahmy.
He added that attracting foreign investment needs a good investment law to protect investors, ensure their rights, and rid bureaucracy, all by eliminating obstacles facing them.
He explained that the state needs to find out why exports have been declining and to overcome these challenges. He added that the state also has to support exporters and provide them with the appropriate environment to boost their exports.
Fahmy noted that the deficit in the state budget is still growing, while the state continues to finance it through high-cost borrowing. He pointed out that the state has rights, including collecting taxes, which, if properly instituted, can bridge the gap.
Furthermore, Fahmy said that half the transactions of the Egyptian economy are within the informal economy, which does not pay taxes, noting that nobody has worked seriously on that issue yet.
“We do not have to re-invent the wheel,” he noted. “If we do not know the answer, we can look at other countries that suffered the same problems and find how they were able to solve them,” he noted.
He pointed out that there is a political will to change, but the state administration must carry out its role and reconsider the laws and legislations that control officials. This will help each official fulfil his part and make the right call without fears or worries.
He added that the government also needs to keep open lines of communication with the people and be transparent in all the decisions and the major projects it implements to avoid criticism.