Cairo: A senior official in the Egypt’s government has categorically said on Sunday that the Egyptian pound will not collapse and its incremental depreciation has stabilized even though there is rise in political instability in the country. The official is a senior aide to the President Mohamed Morsi.
Morsi’s Deputy Chief of Staff and Foreign Policy Adviser, Essam Haddad, said in an interview that he does not expect the pound to fall further after it lost more than 8 percent against the USD since the start of the year.
He said, “I think it has reached a level of stability.”
“So as long as it (depreciation) is going incrementally and in a way that is market-sensitive, then there is no harm in this,” he added.
More than two years of political instability following the overthrow of President Hosni Mubarak in 2011 has surged dollar value. The Egyptian pound has faced extra pressure since late last year, when violent protests against President Morsi erupted, setting back hopes for economic recovery.
Violence flared once again in Egypt on Sunday, with thousands blocking access to the harbor in Port Said to demand justice over the deaths of dozens of people in riots last month.
That violence was triggered by anger over the death sentences handed down to 21 people from Port Said for their involvement in a soccer stadium disaster in the city a year ago.
Haddad said about the Egyptian currency, “What we have to be very careful of is to (avoid) a drastic change, or a complete fall or collapse. And this is something we are not seeing in the foreseeable future and we hope that it will recover.”
A black market in hard currency has sprung up in recent weeks due to a shortage of dollars, with street traders quoting the pound at more than 7 to the dollar compared to an official rate of 6.73.
Regulated foreign exchange bureaus are flooded by demand for dollars and cannot meet the demand, the Head of the foreign exchange department at the Chambers of Commerce said.
A senior business leader affiliated with the ruling Muslim Brotherhood, Hassan Malek, observed that people are expecting further devaluation of the pound.
“I’m not, of course, a technical (expert) but people expect a little bit of devaluation in the future,” he said.
He added that the economy is going through a very difficult period because the transition to democracy launched by the 2011 uprising that toppled former President Hosni Mubarak is not yet complete and institutions are not working fully.
Asked about such concerns, Haddad said, “When the situation starts to stabilize more on the political side, I believe the Egyptian pound will be even stronger.”
He also said that there were calls from the business community to change the exchange rate to boost the economy by improving exports and making Egypt more attractive for foreign investors, and those changes have now occurred.
“Market forces will act on this and decide what is the best value for the Egyptian pound,” Haddad concluded.