Salman affirms CBE's independence

Following controversial statements on Egyptian pound depreciation, investment minister Salman attempted to calm down markets by confirming CBE's independence

Minister of Investment Ashraf Salman said the Central Bank of Egypt (CBE) is completely independent in setting the country's monetary policy and determining the pound's exchange rate.
Salman announced on Monday, during the Euromoney conference, that pound's devaluation is no longer a matter of choice.
"The CBE, which decides the monetary policy in Egypt, is totally independent, professional, and has experiences and capabilities that have made it able to overcome many of the critical stages Egypt went through", he said.
Coinciding with the minister's announcements, the capital market's benchmark index EGX-30 dropped 1.48%, shedding EGP 5.79bn. On Tuesday, the benchmark index also declined 3.38% and lost EGP 9.11bn, registering the largest decline in two weeks.
Salman added, in a press release issued on Tuesday, that the government will institute additional protective measures, from an investment point of view, to decrease the effects of the challenges in the international economy on Egypt, through enacting expansionary procedures, without adopting deflationary policies that hinder growth.
According to Salman, the government will work through an expansionary investment policy, as well as launching labour-intensive projects and capital-intensive projects to increase employment, in addition to expanding projects in which national involvement is high. This strategy will maintain foreign exchange reserves and help stabilise the pound's exchange rate against the world's currencies.
Salman added that in order to maintain sustainable growth in Egypt over the next period, EGP 400bn in local investments, and about $10bn in foreign direct investments will be required. Such investments will equal a rate of between 5% and 5.5% GDP growth in the current fiscal year (FY) 2015/2016.
Additionally, according to Salman, the Ministry of Investment seeks to increase the number of branches and service complexes of the General Authority for Investment and Free Zones (GAFI) throughout the governorates. This move would be part of plans to ease the way for investors and attract more capital.
Ali Al-Hariri, deputy head of the Foreign Exchange Bureau Division at the Federation of Chambers of Commerce, said there has not yet been any impact on the market from the statements made by the Minister of Investment.
Al-Hariri further explained that demand for the dollar remains normal, and exchange agencies have not noticed an increase in the demand by customers, as of Tuesday.
He added that the price of the dollar against the pound has settled at EGP 7.83 for buying and EGP 7.88 for selling, and there have been no changes in the last few days.
Since Monday, speculation in the market has seen the price of the dollar against the Egyptian pound begin to move again on the parallel exchange market, reaching EGP 8.10 after the Minister of Investment's remarks, in which he noted that the devaluation of the pound is inevitable. However, Al-Hariri denied this, and confirmed the continuation of stability in demand and price for the dollar.
Al-Hariri noted that the CBE's commitment to cover importers' needs for foreign currency has helped to stabilise the market, according to the priority system applied by the CBE, while exchange agencies only meet the demands of individuals.