Exchange rate liberalizaton: a must for economy activation
Although the Central Bank of Egypt (CBE) has already allowed for the first time to move the dollar's average exchange rate by one piastre to increase it from 385 PT to 386 PT against the US dollar, yet such a step was seen by dealers, as far below expectations.
Despite that it is still too early to assess the new step, as such increase did not so far help get rid of the price diversification in the market, said Chairman of the National Company for Investments, Fouad Sultan.
There is a consensus that further liberalization of the exchange rate is suitable for the Egyptian economy, Sultan, former Minister of Tourism, pointed out.
Though the price move of the Egyptian pound versus the US dollar was set by the CBE at a maximum rate of 1 per cent up or down, yet other opinions suggested moving the price margin within 2 to 5 per cent rate to ensure a further flexibility for the dollar's price move.
According to the new system, the CBE will determine the average of the Egyptian pound against the US dollar with fixing the exchange rate of other currencies in accordance with these currencies' exchange rate against the dollar in world markets, giving a margin of 2 per cent up or down.
Moving the exchange rate is a necessity as it is impossible to resist market forces, according to member delegate of Cairo Barclays Bank, Wagdy Rabat.
The solution for the current situation requires the adoption of a monetary and financial policy that could help decrease the balance of payments' deficit through enhancing an export-oriented policy that provides foreign currency, he said.
Further attention should also be given to enhance the inflow of foreign investments through reducing red tape and bureaucratic measures, he added.
Foreign investments put into shares and bonds portfolios are affected the most by the growing skepticism over the exchange rate, Sultan said.
When foreign businessmen find out that dealings are taking place with unrealistic prices, they refrain from getting involved in business for fear of price changes that could undermine their profits, he elaborated.
To experts, the recent move in the dollar's exchange rate was regarded as a positive decision taken by the CBE, though still seen as insufficient to regain the dealers' trust.