Government is determined to control markets to break monopoly
Egypt, Economics, 3/14/2003

The Cabinet has expressed determination to control markets, and to break monopoly indicating that there would be no return to obligatory pricing.

He said the foreign exchange policy, which has been in effect since January 29, represents an inevitable economic reform.

The Cabinet, at its meeting this week under Prime MinisterAtef Ebeid asserted that this policy, which is still in its transitional period, will tend to stabilise gradually, adding that ups and downs on the market were already faced by the states applying this system.

Ebeid expressed the keenness of President Mubarak and the government to maintain stability of prices and to confront unjustified price increases.

He said the government will continue to subsidies essential commodities.

The Cabinet took a number of measures and recommendations to maintain stability of the exchange market including the introduction of new saving systems and transfer by the oil sector and Suez Canal Authority of their foreign exchange revenue to banks on a daily basis.

Minister of Information Safwat Al Sherif said a discussion of mechanisms of exchange rates, which are being applied since January 29, and an evaluation of these policies topped the agenda of the Cabinet meeting Wednesday.

The Cabinet stressed that the policy of the system of the foreign exchange rate represents an inevitable and radical economic reform.

It is passing through a transitional stage and is heading gradually towards stabilisation.

A degree of rise and fall in prices, as we are witnessing, is natural and has been witnessed by all markets, which freed the exchange rate of foreign currency.

Sherif said that the Cabinet stressed that it was necessary to make a periodical evaluation, to maximise positive aspects and deal with negative aspects with full confidence and continuity and to stress that the initiative should be in the hands of the banking sector which should not act as a reaction but should act with determination and effectiveness and face negative aspects in a manner which realises stability.

Sherif said that Egypt has potentials of success and constant flow of foreign currencies from the revenues of the Suez Canal, oil, exports, tourism, services sectors and remittances of Egyptians abroad to the amount of 14 billion dollars annually. This is sufficient to realise complete stability of the exchange market.

Minister of Information Safwat Al Sherif said the Governor of the Central Bank of Egypt submitted a report to the Cabinet in which he enumerated a number of facts:

Ê- The balance of payments realised in the first six months of the current fiscal year (2002-2003) a surplus of 152.7 million dollars against a deficit of 359.1 million dollars in the corresponding period in the last fiscal year.

- The value of commodity exports rose to 3.9 billion dollars in the first six months of the present fiscal year compared to about 3.6 billion dollars in the corresponding period in the last fiscal year, an increase of 234.5 million dollars, at a growth rate of 6.5 per cent.

- The services balance registered a surplus of 2.3 billion dollars in the first half of the present fiscal year compared to a surplus of 1.9 billion dollars during the corresponding period in the last fiscal year, an increase of 308 million dollars, at a growth rate of 15.8 per cent.

- The revenues of the Suez Canal increased during the same period to 1047.5 million dollars.

- Tourism revenues rose during the same period to 2074.5 million dollars compared with about 1733 million dollars.

- Direct foreign investment rose to 552.4 million dollars compared to about 333.7 million dollars during the same period in the last fiscal year as a result of offering several companies for privatisation.

- State reserve assets of foreign currency at the end of December 2002 stood at about 14.35 billion dollars, an increase of 350 million dollars at the end of December 2001.

- External debt at the end of January 2003 stood at 28.8 billion dollars, with repayment scheduled up to 2040. External debt service does not represent any problems for Egyptian economy.

There is commitment to pay installments plus interest of schedule. Installments and interest have been paid up-to-date until the last installment.

Minister of Information Safwat Al Sherif said that as regards the foreign exchange market, the Governor of the Central Bank of Egypt gave a full statement of statistics related to the market, which amounted, up to Tuesday, to 470 million dollars.

The Governor of the Central Bank emphasised that there are no restrictions on the freedom to withdraw or deposit in foreign currency.

He said there was no truth in biased rumours circulated from time to time by manipulators and people of interest.

He said that these rumours should be dismissed and stressed that all deposits in banks are safe in the currency in which they have been deposited.

The Cabinet approved the report of the Governor of the Central Bank of Egypt and stressed that resources of foreign currency exceeded its use in the first half of the current fiscal year.

The resources are expected to exceed use in the second half of the present fiscal year as a result of facilities provided by the World Bank to Egypt which amount to one billion dollars.

The Cabinet approved facilities offered by Arab finance funds, totalling half a billion dollars, to finance imports and exports.

*Decisions

ÊMinister of Information Safwat Al Sherif said that the following decisions were taken:

Ê- Funds received will be handed over to the banking sector to be used and credit facilities will be opened, those which have been presented so far and new credits.

Ê- To stress the improvement of services rendered to those who deal with banks, foremost among which is to grant requests of owners of current accounts and deposits, whatever the volume and at once. This is the best answer to those who circulate rumours.

- To provide lucrative saving facilities in the Egyptian pound for Egyptians within the framework of competition among banks in a bid to maximize the value of the Egyptian pound.

- To comply immediately with requests of travellers.

- The Ministry of Communications and Information Technology will collaborate with the Central Bank of Egypt to set up an electronic system, which will provide round the clock information on the operations of sale and buying and the exchange rate of foreign currency. This service will be connected to subscribers and media organizations.

Sherif said that the Minister of Foreign Trade stated at the Cabinet meeting that an agreement was being sought, through export organizations and unions, on rules acceptable to them to transfer directly to banks, the revenues of exports as a result of opening credit facilities.

It was decided that the oil sector and the Suez Canal Authority and government agencies will transfer their revenues of foreign currency immediately, and on a daily basis, and not to retain any part. This will pump funds in the veins of foreign currency.

The Minister of Tourism reported on the results of meetings of tourism organizations and hotel sectors, which discussed rules which ensure immediate and continuing pumping of revenues to the banking sector.

The Prime Minister has asked the ministers to define their resources and their use of foreign currency up to the end of the current fiscal year and also as regards the budget of fiscal year 2003/2004 provided use is rationalized and revenues are maximized and there should be stress on respect of law as regards attempts at manipulation and attempts to deal with the illegitimate market outside the banking sector and exchange offices in order to realize stability of the exchange market.

This should be dealt with by providing abundance and through the free market and free economy.

Minister of Information Safwat Al-Sherif said the Cabinet also discussed the question of the stability of prices and the impact of freeing the rate of exchange on commodities and the unjustified increase in prices.

The Prime Minister reported on discussions, which took place at a meeting held Tuesday under the chairmanship of President Hosni Mubarak.

Prime Minister Atef Ebeid stressed at the Cabinet meeting that President Mubarak and the government are keen on the realization of stability of prices and to confronting unjustified increase in prices.

The Cabinet reviewed the results of meetings held by Ebeid to realize stability in markets and the Cabinet listened to a report on steps which have been taken in this respect, foremost among which are the following:

Ê- To affirm that the government will continue to subsidies basic commodities in the current budget and in future budgets.

- The Minister of Supply has agreed with traders on a price, which will be used as a guide, and the traders approved this price voluntarily.

- The Minister of Supply and Home Trade reported on an agreement reached with members of the chambers of commerce and major wholesale and half-wholesale traders.

He said that manufacturers and traders, who produce or distribute, made a commitment to return, for a period of three months, the prices of 15 basic commodities to their level before January 29.

A producer or importer of a commodity the cost of which is above this level will refer the matter to the chamber to which he is affiliated to examine the actual cost of this commodity.

The Minster of Information said that the Cabinet decided that the Ministry of the Public business Sector would offer all commodities it produces at pre-Jan 29 prices and to give full exemption from customs duties to commodities offered at these prices.

The Ministry of Finance will take measures to deal with the importers of these commodities on the basis of a constant rate of exchange of the customs dollar effective as of March 12, for at least one month, which can be renewed.

The following decisions were also adopted:

Ê- The Food Commodities authority will import large quantities of 10 basic commodities to be offered to the public at cost prices at cooperatives and half-wholesale markets.

- The governorates will be asked to provide outlets and half wholesale markets at once and to announce the price of the factory and the price of sale to the public on each commodity.

- Cooperation among the governorates and parties to find land and places for half-wholesale markets and depots at nominal rent in a bid to reduce cost.

- To provide labor under plans to employ graduates and to exempt these markets from taxes for 10 years and grant them full customs exemption on their requirements and products.

- (The Minister of Information gave guide prices at which 18 commodities will be sold to consumers).

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