How can Al-Sisi fulfil his promise to solve the US dollar shortage in 170 days?

Stability of the foreign exchange market requires the government and the CBE to take unconventional and bolder measures, says Abdel Aal

President Abdel Fattah Al-Sisi promised to solve the US dollar shortage, which Egypt has been suffering from for years, before the end of this year.
This promise was made during a 13 June meeting between Al-Sisi and a group of students under the presidential programme for the rehabilitation of youth for leadership positions. If Al-Sisi aims to fulfil the promise of solving the US dollar shortage by the end of the year, that would give him only 170 days.
Is such a deadline feasible to solve this chronic problem?
To address this question, Daily News Egypt interviewed board member of both the Suez Canal Bank and Arab Sudanese Bank, Mohamed Abdel Aal, who is a 30-year expert in managing foreign exchange markets. This is an attempt to find a vision for how Al-Sisi can fulfil his promise—if at all possible.
How would you explain the president's promise to solve the US dollar shortage before the end of the year?
This promise, to me, means that the US dollar shortage has moved into the presidential level, becoming a national security issue of top priority.
This also means that the way of dealing with elements of the problem will not be limited to finding and curing the traditional economic side of the problem—such as easing imports and stimulating exports—but will likely incorporate unconventional measures. This aims to reach the main target, which is the stability of the exchange market and finding a balance between the demand and supply of hard currency, as well as curbing inflation.
What role will the Central Bank of Egypt (CBE) play in fulfilling the promise?
The CBE's governor is well aware that the president tends to keep his promises to Egyptians. He must have understood that the president's remarks mean finding a solution in 170 days.
Do you think the CBE can do that?
The CBE alone, of course, cannot. Therefore, there must be serious coordination between the monetary and fiscal policies. It [coordination] must aim to solve the widening budget deficit, reduce borrowing, and cut down on the interest rate to stimulate direct and indirect investment, as well as transform banks into locomotives for finance investment. The coordination process between the government and the CBE will require new legislation that may require the endurance and sacrifice of Egyptians as a result of carrying some financial burdens, which are supposed to be considered and studied.
What do you think are the factors that can help the president fulfil his promise?
There are a lot of factors that can contribute to reaching this goal quickly.
The most important of these factors: stopping consumption of foreign exchange reserves for use in supporting the exchange rate. This will direct some hard cash to supporting stopped factories that produce goods for exports or alternatives for imports.
Some believe that the foreign exchange reserve should defend the Egyptian pound against other currencies, especially the US dollar, and secure imports.
We do not have the luxury of defending our national currency. The structure of our economy is still deteriorating faster than we are able to maintain. The trade deficit amounts to $70bn. Most of the goods we import can be produced in Egypt but the well of importers and businessmen do not match the needs of Egyptians.
With regard to projects that produce exports, they should be granted exemption from all kinds of taxes. Their production input must be exempted from customs for 10 years.
What other factors could help end the US dollar shortage?
Subsidies must be eliminated altogether. They should only be allocated to those who need them the most, in cash or through subsidies cards. Part of the subsidies value should be allotted an incentive for exporters.
Moreover, nobody can deny the importance of tourism as a main source of foreign cash to Egypt. We will need to encourage foreign investors and tours operators to build and export new hotels, resorts, and facilities to help the sector recover. They can also invest in joint tourism enterprises with local Egyptian investors.
This procedure should ensure a stable flow of tourists to Egypt, even under unfavourable conditions. Countries that export tourism to Egypt will have to look after their investments and interests and are keen to keep the sector from harm.
How can we deal with remittances from Egyptians working abroad to help resolve the US dollar shortage?
Remittances from Egyptians working abroad are one of the largest foreign exchange sources for Egypt. Hence, they are a key factor in the government's plan to reach monetary stability.
But we cannot hide the fact Egyptians' savings abroad has now turned towards financing the black market. We, therefore, should find alternative solutions to this reality. We have to implement these solutions for the benefit of citizens inside Egypt and abroad as they [citizens abroad] should have the liberty to transfer their savings as they want.
I would also like to draw attention to the fact that Egypt, which is not richer than the United States, does not chase its nationals around the world through the Foreign Account Tax Compliance Act (FATCA) to ensure the collection of taxes.
I also would like to emphasise that the national motto "Long Live Egypt" will not do any good in making Egyptians transfer their savings through official channels. We should give incentives or bonuses for the price of transferring money through official channels at official market prices.
Moreover, the government should consider issuing a law that would impose a tax on the income of all Egyptians working abroad and exempt the remittances that go through official channels from such a tax. We could also stop granting work permits to citizens that do not pay that tax.
I also believe the government should be strict in dealing with currency speculators and black market traders by activating the laws that criminalise these acts.
What about the banks' role in ending the US dollar shortage?
Commercial Egyptian banks should expand their borrowing of US dollars from similar banks abroad to finance their commercial operations. They must rely on themselves in securing hard cash. They could do so by encouraging their export clients to provide hard cash, which then can be used to fill the gaps in financing letters of credit for importing operations. Banks also should seek to expand their borrowing limits with correspondents abroad, exempt export customers of all banking commissions, and give them preferential rates on their dealings and loans in Egyptian pounds.
The CBE's interventions in the exchange rates should be limited to extreme necessity and in the scope of the implementation of monetary policy, without any pressure on reserves.
What about approaching the International Monetary Fund for loans? Is this the right time?
Yes, I believe this is the right time to negotiate with the IMF and international financing institutions to obtain loans and grants. They can be used to finance national projects at lower costs and with better terms, compared to short-term borrowing from countries.
How can we use state-owned assets to solve the US dollar shortage?
It is no secret that Egypt is rich and wealthy for its assets, but using these assets to solve an economic problem, such as the US dollar shortage, requires honesty and transparency, in addition to admitting reality.
Here, I want to highlight a few radical solutions that, if considered, can transform the nation from on with a severe shortage of foreign exchange to a country with a surplus and a continuous income of US dollars.
These solutions include inventory of lands across Egypt that are not being used in the best way. We can market these lands by international companies and sell them in US dollars to investors. The revenue of selling those lands should be used to build cities and facilities to bring good to all Egyptians and investors.
There are state assets represented by some public sector companies that have been stumbling or work on a non-economic policy. We can also evaluate these companies and sell them in US dollars to investors for mutual beneficial.
Finally, I would like to stress that time is short and solutions require decisive steps with responsibility and authority. Without all of that, the problem will worsen and generate even more problems that can put the Egyptian economy at gun point.