The main argument heard for Egypt not devaluing its currency has been that this would cause the price of imported goods to rise, causing undue hardship for the poor.
But the only imports the currency peg has made relatively inexpensive are those on the central bank’s priority list. The price of just about everything else has been made more expensive, as importers are forced to scramble to find foreign currency on the black market or to wind their way through the central bank’s growing list of restrictions on how the currency can be used.
Poultry and meat, grains, edible oil and tea make the priority list. So do capital goods, spare parts, components, as well as raw materials for industry, especially pharmaceuticals. But even these goods are often delayed and restricted as the government searches for scarce foreign currency, importers say. That means their price on the domestic market does not always reflect the favourable exchange rates set by the central bank.
If the goods and services from abroad are not on the priority list, well, good luck.
The flow of these commodities to the Egyptian market has been dwindling or simply drying up, causing prices to increase faster than they would have had the government left the exchange rate alone.
And it is not simply the lack of supply that pushes prices up. A whole new layer of bureaucracy has been added to the purchase of goods from abroad, increasing the costs in time and money that importers pay. You can be sure that the importers are passing these on to consumers.
The bottleneck tightened when the central bank declared war on Egypt’s thriving black market in foreign exchange in January. Since then, importers are only allowed to deposit the equivalent of US$50,000 a month into their bank accounts towards imports each month, and no more than $10,000 per day.
One businessman estimates that it now typically takes him two months to import a consignment of goods rather than one previously, as he scours the black market for currency then feeds it into his bank account. Other businessmen have been opening up bank accounts at multiple banks to get around the $50,000 restriction, but at the cost of time and energy.
One product that has not been getting into Egypt like before is personal computers. In the second quarter, imports of personal computers fell 32.4 per cent from the same period last year, according to International Data Corporation, a technology research firm. The currency restrictions played a significant role in the decline, it said.
That is dangerous because businesses and industry need computers to expand production. If factories in Egypt don’t churn out more products, the prices of these products will increase, boosting inflation.
Egyptian industry as a whole has been suffering from a scarcity of imported parts and raw materials. Not only does this fuel inflation at home, it hurts exports. According to Al Borsa newspaper, non-oil exports last month fell 20 per cent year-onyear, the eighth month of decline in a row. Exports in the first eight months of this year tumbled to $12.5 billion, from $15.4bn for the same period last year.
Businessmen are becoming increasingly vocal in calling on the central bank to let the Egyptian pound slide. This prompted Ashraf Salman, the minister of investment, to reassure a recent Euromoney conference on the economy that the currency would have to be devalued. This caused the pound, which was already weakening on the black market, to slide even further.
After Mr Salman’s statement, Hisham Ramez, the governor of the central bank, furiously denied any plan for a currency devaluation, prompting the cabinet to state that Mr Ramez and the central bank alone were responsible for currency policy. But despite this, Mr Salman kept his job in a cabinet reshuffle a few days later.
Mr Ramez, whose four-year term as governor is due for renewal on November 23, has increasingly identified himself as the architect of the strong currency policy. In an interview with the CBC television station, he dismissed a call by the IMF to adopt a more flexible monetary policy as routine, asserting that not everything the IMF says is correct. He also said that Mr Salman’s comment had caused the US dollar to skyrocket against the pound, but the central bank was able to bring it back under control.
“The statement was unfortunate and does not express the view of the central bank. The government does not interfere in the central bank’s work,” said Mr Ramez.
Patrick Werr has worked as a financial writer in Egypt for 25 years
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Read more about the coronavirus
The specs
Engine: 3.8-litre twin-turbo flat-six
Power: 650hp at 6,750rpm
Torque: 800Nm from 2,500-4,000rpm
Transmission: 8-speed dual-clutch auto
Fuel consumption: 11.12L/100km
Price: From Dh796,600
On sale: now
Company%C2%A0profile
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What is an ETF?
An exchange traded fund is a type of investment fund that can be traded quickly and easily, just like stocks and shares. They come with no upfront costs aside from your brokerage's dealing charges and annual fees, which are far lower than on traditional mutual investment funds. Charges are as low as 0.03 per cent on one of the very cheapest (and most popular), Vanguard S&P 500 ETF, with the maximum around 0.75 per cent.
There is no fund manager deciding which stocks and other assets to invest in, instead they passively track their chosen index, country, region or commodity, regardless of whether it goes up or down.
The first ETF was launched as recently as 1993, but the sector boasted $5.78 billion in assets under management at the end of September as inflows hit record highs, according to the latest figures from ETFGI, a leading independent research and consultancy firm.
There are thousands to choose from, with the five largest providers BlackRock’s iShares, Vanguard, State Street Global Advisers, Deutsche Bank X-trackers and Invesco PowerShares.
While the best-known track major indices such as MSCI World, the S&P 500 and FTSE 100, you can also invest in specific countries or regions, large, medium or small companies, government bonds, gold, crude oil, cocoa, water, carbon, cattle, corn futures, currency shifts or even a stock market crash.
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
QUARTER-FINAL
Wales 20-19 France
Wales: T: Wainwright, Moriarty. Cons: Biggar (2) Pens: Biggar 2
France: T: Vahaamahina, Ollivon, Vakatawa Cons: Ntamack (2)
COMPANY%20PROFILE
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COMPANY%20PROFILE
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The%20trailblazers
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A German university was a good fit for the family budget
Annual fees for the Technical University of Munich - £600
Shared rental accommodation per month depending on the location ranges between £200-600
The family had budgeted for food, books, travel, living expenses - £20,000 annually
Overall costs in Germany are lower than the family estimated
As proof that the student has the ability to take care of expenses, international students must open a blocked account with about £8,640
Students are permitted to withdraw £720 per month
The biog
Age: 46
Number of Children: Four
Hobby: Reading history books
Loves: Sports
MATCH INFO
Hoffenheim v Liverpool
Uefa Champions League play-off, first leg
Location: Rhein-Neckar-Arena, Sinsheim
Kick-off: Tuesday, 10.45pm (UAE)
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Gulf Under 19s final
Dubai College A 50-12 Dubai College B
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
Company%20Profile
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BUNDESLIGA FIXTURES
Saturday
Borussia Dortmund v Eintracht Frankfurt (5.30pm kick-off UAE)
Bayer Leverkusen v Schalke (5.30pm)
Wolfsburg v Cologne (5.30pm)
Mainz v Arminia Bielefeld (5.30pm)
Augsburg v Hoffenheim (5.30pm)
RB Leipzig v Bayern Munich (8.30pm)
Borussia Monchengladbach v Freiburg (10.30pm)
Sunday
VfB Stuttgart v Werder Bremen (5.30pm)
Union Berlin v Hertha Berlin (8pm)
The Saudi Cup race card
1 The Jockey Club Local Handicap (TB) 1,800m (Dirt) $500,000
2 The Riyadh Dirt Sprint (TB) 1,200m (D) $1.500,000
3 The 1351 Turf Sprint 1,351m (Turf) $1,000,000
4 The Saudi Derby (TB) 1600m (D) $800,000
5 The Neom Turf Cup (TB) 2,100m (T) $1,000,000
6 The Obaiya Arabian Classic (PB) 2,000m (D) $1,900,000
7 The Red Sea Turf Handicap (TB) 3,000m (T) $2,500,000
8 The Saudi Cup (TB) 1,800m (D) $20,000,000
%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fislamic-economy-consumer-spending-to-increase-45-to-3-2tn-by-2024-1.936583%22%20target%3D%22_self%22%3EGlobal%20Islamic%20economy%20to%20grow%203.1%25%20to%20touch%20%242.4%20trillion%20by%202024%3C%2Fa%3E%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fuk-economy-plunges-into-worst-ever-recession-after-record-20-4-contraction-1.1062560%22%20target%3D%22_self%22%3EUK%20economy%20plunges%20into%20worst-ever%20recession%20after%20record%2020.4%25%20contraction%3C%2Fa%3E%3C%2Fp%3E%0A%3Cp%3E%3Ca%20href%3D%22https%3A%2F%2Fwww.thenationalnews.com%2Fbusiness%2Feconomy%2Fislamic-economy-consumer-spending-to-increase-45-to-3-2tn-by-2024-1.936583%22%20target%3D%22_self%22%3EIslamic%20economy%20consumer%20spending%20to%20increase%2045%25%20to%20%243.2tn%20by%202024%3C%2Fa%3E%3C%2Fp%3E%0A
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.