9 - 15 August 2001
Issue No.546
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Al-Ahram Weekly Online 9 - 15 August 2001 Issue No.546 |
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A crisis of exchange
The crisis that has beset the currency exchange market now prompts the government to take measures to widen the margin of fluctuation in banks and exchange bureaus, raising its price three per cent above that announced by the Central Bank and further limiting the scope of the black market. Will these measures resolve the crisis?
That depends on the reasons for the crisis. If it is due simply to speculation, such measures will have a positive impact; if it reflects a fall in real terms in the value of the currency (arising perhaps from the $34.5 billion trade deficit accrued over the last three fiscal years compounded by a debt to the International Monetary Fund of two per cent and 1.2 per cent of Egyptian GNP for 1999 and 2000, respectively), the crisis will not be resolved until that drop is addressed.
Among the reasons for the drop in the value of the pound, one might cite the government's decision to peg the pound to the dollar and the fact that, in introducing a mobile phone network, Egypt imported everything, making no contribution of its own to the international mobile phone market. Corruption and black market economics have also contributed to the crisis, since money transferred outside the country must first be converted into hard currency.
If the crisis is to be resolved, then, the Egyptian administration must resolve all these issues, not simply introduce temporary measures unlikely to have any significant effect.
* This week's Soapbox speaker is on the staff of Al-Ahram Centre for Political and Strategic Studies.
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