A number of MPs have suggested a change in Egyptian monetary policy punctuated by the adoption of a floating foreign currency exchange rate in the face of the erosion of foreign currency reserves and the concomitant negative impact on industry and food commodity prices.
Egyptian MP Basant Fahmy suggested a floating exchange rate will mitigate the Egyptian pound’s devaluation, if CBE managed to bring foreign exchange reserves to $35bn.
“The decision to float the [Egyptian] pound at the moment of low foreign exchange reserves will be a big gamble, which may lead to major shocks in the prices of products affecting the lives of the citizen,” she said.
MP Ashraf El-Araby refused to link the change in monetary policy to a foreign exchange reserve holdings of $25bn or $35bn. “The current situation does not allow the foreign exchange reserve to reach $25bn, in light of the decline of non-oil exports, tourism and foreign direct investment in Egypt,” he said.
The decision to adopt a floating exchange rate has become a “harsh” necessity despite its expected impact on the price of products. “It is better for us to take the bitter medicine than to remain sick,” he said.
Chairman of Egyptian Federation of Industries (FEI) MP Mohammed Zaki El-Swedy said he is not worried about the increase in the value of the US dollar against the Egyptian pound as much as its availability for industries.
He called for an increase in dollar deposits in banks and for less regulation on dollar transactions, allowing banks the discretion to decide the value of dollar purchases.
Furthermore, El-Swedy said the associated authorities should ensure that the industrial sector has access to US dollars to avoid the halt of production and the decline of employment opportunities.
MPs assured the parliament will not interfere in the monetary policy adopted by the Central Bank of Egypt (CBE) and its management of the Egyptian pound’s exchange value against other foreign currencies. However, the House of Representatives will request that Governor of CBE Tarek Amer disclose his strategy in dealing with the dollar crisis.
The dollar exchange rate fluctuated in the informal market between EGP 9.80 and 10, while its price has remained steady in the formal market at EGP 7.38 per dollar.
CBE decided to raise the ceiling for dollar cash deposits at banks to $1m per month for importers, and $250,000 per month for exporters in February.
MP Mohamed Ahmed El-Zeny, head of the interim industry and energy special committee at the House of Representatives, said Egypt should close the exchange companies so as to eliminate the phenomenon of speculation on the Egyptian pound in some Arab cities, especially in Dubai, the UAE and Amman, Jordan.
El-Zeny believes the dollar exchange rate in the informal market does not reflect strong demand. Rather, it shows a practice of speculation on the currency.
“If we controlled the supply and demand of US dollar, we would leave the market to decide its exchange rate,” he said.