Lower dollar rates

By Ahmed El-Naggar

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It was interesting to note the effect on the price of the dollar on the Egyptian black market caused by the Central Bank's decision to inject $400 million into the market, while guaranteeing that 75 per cent of the hard currency from private-sector exports be transferred to Egyptian banks.

Their principal value is inspiring trust, however such procedures can only have a short-term effect. The rule governing the transfer of export money to banks, for one, must be strictly observed and applied to every business irrespective of connection or status and the banks should likewise provide those Egyptians who require it the hard currency they need, otherwise the decision will have absolutely no positive effect on the Egyptian economy at all.

Moreover, short-term policies aimed at inspiring trust should be supplemented with long-term procedures to back them up. Otherwise the market will soon be sent into disarray. Foremost among such long-term policies should be achieving a proper commercial balance in exports and imports. This could include rationing imports and providing exporters with added incentives, as well as encouraging new investment.

Reducing the price of the dollar is not an end in itself. It will be of help only if it is a mechanism for achieving other aims.

* This week's Soapbox speaker is editor of Strategic Economic Directions, issued by Al-Ahram Centre for Political and Strategic Studies.