Egypt would benefit from a more flexible currency regime that would help the country attract investment and tourists and create jobs, the International Monetary Fund said. "A more flexible exchange rate policy focused on achieving a market-clearing rate and avoiding real appreciation would improve the availability of foreign exchange, strengthen competitiveness, support exports and tourism, and attract foreign direct investment," IMF mission chief Paul Jarvis said in an e-mailed statement late yesterday. It followed two weeks of talks between the mission and Egyptian authorities in Cairo. Egypt's pound has slid against the dollar on the black market even as the official exchange rate hasn't changed in about five months. The gap between the two rates was almost 8 percent last week, according to a Bloomberg survey of unofficial traders. Central bank Governor Hisham Ramez vowed this month to eliminate the black market, and described the bank's policy as a "managed float" of the currency. The pound has fallen about 3.7 percent against the dollar at the official rate in the past year. The headline inflation rate was 11.8 percent last month. Egypt has struggled to revive its economy since 2011, as years of political turmoil followed the uprising against Hosni Mubarak that year. The IMF said it expects growth of 3.8 percent in the 2014-2015 fiscal year. It predicted a budget deficit of 11 percent of gross domestic product in the period, after the government approved measures that will bring savings of 2.5 percent of GDP. "Continued subsidies reform" will be needed to bring the deficit below 10 percent in 2015/2016, the IMF said. The second-round inflationary impact of energy-price increases as a result of an initial phase of subsidy cuts in July has been contained by the central bank's interest-rate increase that month, the Fund said. Source: Bloomberg
