The current rise of the US dollar value against the Egyptian pound will benefit the economy on the long term; however, it will harm the budget on the short term, said head of the Federation of Egyptian Industries (FEI) Mohamed El Sewedy in a Wednesday press conference.
He said that before the Central Bank of Egypt’s dollar auctions, which started in December 2012 on a weekly basis, the government was interfering to save the value of the Egyptian pound.
This led to activating the black market, which was buying dollars at higher prices than the official prices, thus companies were losing money because they had to deal with the official market, El Sewedy said.
“Current high dollar prices will bring Egypt more dollars,” he said, explaining that reducing the gap between the official price and black market price will help in achieving that, as those who are willing to sell dollars will sell them officially, therefore, increasing the foreign currency in banks.
El Sewedy expects $1 to stop at EGP 8, and he expects this to be reached before the Economic Summit in March.
With regards to the negative effect of depreciating the value of the Egyptian pound on local manufacturers, El Sewedy forecasts that the issued law granting preferential treatment to local products will reduce imports, and therefore dollar consumption.
The value of the US dollar had remained at around EGP 7.14 during the past six months. In December, however, the CBE announced it will raise the number of weekly dollar bids, which led many analysts to forecast devaluation for the Egyptian pound.
The devaluation is believed by economists to reassure foreign investors who would like to invest in dollars. Others argued that prices of consumer goods, such as medicine, oil and some food products, will get higher.