Soapbox:

Pound for pound

By Magdi Sobhi

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Almost over night the Egyptian pound rose by five per cent against the dollar. Such news once concerned few beyond the government and a handful of investors. Now it catches the attention of many Egyptians whose livelihood hinges on the influx of foreign currency or who, since the floating of the pound on 26 January 2003, have begun to convert their savings into dollars.

Several factors contributed to the rise. Petroleum prices reached their highest level in 20 years, helping Egypt to its best balance of trade figures in memory. Rising petroleum prices also helped generate a rise in remittances from Egyptians working in oil exporting countries. Suez Canal revenues also peaked, reaching $3 billion, while the tourist industry boomed. Clearly, international and regional economic circumstances have worked to trigger an unprecedented boom in Egypt's major sources of hard currency, ultimately yielding a current account surplus.

There is no doubt that the economic and fiscal measures taken by the new government and newly appointed governor of the central bank have improved the confidence of Egyptian, Arab and foreign investors. Investment levels are growing and trading on the stock market has been more energetic than ever.

The central bank provided the Egyptian pound with an additional boost when it raised interest rates, encouraging many to convert hard currency savings into Egyptian pounds.

Much of the credit for the rise in the pound against the dollar lies with the policies of the government and the central bank. They deserve credit. But don't waste any pity on those speculators who had banked on the Egyptian pound falling. Now they are desperately scrambling to unload their dollars.

This week's Soapbox speaker is an expert at Al-Ahram's Centre for Political and Strategic Studies.