Pound devaluation supports economy, promotes tourism, foreign investment: Prime

We should increase the supply of dollars and encourage Egyptians abroad to sell their dollar remittances to banks, says head of research at Prime

The the devaluation of the Egyptian pound against the dollar is a vital necessity for the Egyptian economy, which suffers from the shortage of dollars, according to Abu Bakr Emam, head of the research department at Prime Investment.
The value of the US dollar against the Egyptian pound broke the EGP 9 barrier, recording EGP 9.15 in the informal market, compared to EGP 7.83 in the banks, due to the lack of dollar availability.
This shortage is subsequent to the decline of foreign investment and tourism revenues, offset by the mounting demand for dollar by exporters to purchase their own production inputs.
A manager of an exchange office in Dokki said dollar trade declined at one point of the day Thursday, but its price remains at EGP 9.10, projected increases if the government and the Central Bank of Egypt (CBE) fail to resolve the crisis.
Meanwhile, Emam said the devaluation of the pound against the dollar is not a fix-all for the US currency shortage, urging a package of economic measures to stimulate tourism and investment. He further suggested that the government encourage Egyptians abroad to sell their dollar remittances to banks, so as to increase the dollar supply in the market.
He projected that the CBE will devaluate the Egyptian pound officially within the next few months, bringing the dollar's official value to EGP 8.50. However, he highlighted concerns over the effects of such move socially, since it will lead to an increase in prices as Egypt is an importing country.
Conversely, the devaluation of the pound would give Egyptian exports a competitive advantage in foreign markets as the prices will fall, raising earnings in foreign currency from exports.
However, he called on the government to provide the components for domestic production instead of importing them, which further encumbers the pound and raises the value of the dollar, intensifying inflation.
The CBE announced on Monday a decision to raise the cap on dollar deposits for exporters who need to import production components to $1m per month or its equivalent in foreign currency.
Despite the CBE's decision, the overarching issue of the dollar shortage remains, forcing exporters to buy dollars from the informal market to secure their needs, and thereby contributing to increasing its value.