The Egyptian authorities announced on Sunday the reduction of street lighting and squares in a new policy to increase its reserves of foreign exchange, which is declining. Experts considered this strategy insufficient and that a loan from the International Monetary Fund was inevitable to overcome the crisis.
Faced with the economic challenge facing Egypt, represented by the decline in its reserves of hard currencies, the authorities turned towards a solution represented in reducing the lighting of public squares in the country as part of measures to rationalize and export energy locally, while economists insist that a loan from the International Monetary Fund is inevitable to overcome the crisis.
Egypt is currently living in a critical stage with regard to financial policies, as it is trying on the one hand to control the rise in prices after the annual inflation rate reached about 15 percent, and on the other hand it is seeking to provide foreign exchange to get out of the tunnel of the consequences of the Russian-Ukrainian war.
Simultaneously, Egypt is currently negotiating with the International Monetary Fund for a new loan to support the country where the poverty rate reaches about 30% of the total population of more than 103 million people.
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In fact, Egypt took several measures that it expects to implement, which will allow the provision of coins, starting with the devaluation of the pound last March by about 17% in front of the green paper, so that the selling price of the US currency exceeded 18 pounds at the time.
According to an official statement, the government recently approved a draft decision to rationalize electricity consumption, including "reducing the lighting of streets and public squares", in order to provide quantities of natural gas for "export".
A young Egyptian man in his thirties, who asked not to be identified, stated, "I see the streetlights working during the day (...) and we are suffering from high electricity prices, so they (the government) should look for someone who steals the electricity and we will pay for them."
"Quick dose"
The lecturer at the American University in Cairo and the Egyptian economist Hani Genena considers that the Egyptian government needs, during the next month and a half, to take "severe reform measures, from which we will take a quick dose in the short term so that we can save the dollar," on top of which is the complete liberalization of the exchange rate.
He pointed out that "the problem lies in the (monetary) policy itself," Geneina told AFP that "one of the classic reasons for the exposure of some emerging countries to economic crises is the fictitious stabilization of the exchange rate," explaining that this "encourages (the government borrower) to borrow from abroad." This exposes the country to a predicament if payment is requested.
Geneina added, "Since last week, there has been a severe shortage in the provision of dollars to importers by banks in various sectors," adding that the solution lies in "accelerating the pace of negotiations with the IMF."
It is noteworthy that the Fund previously granted Egypt a loan of $12 billion from the Fund under an agreement signed at the end of 2016, and two other loans in 2020 worth $5.4 billion to implement an economic program and $2.8 billion to confront the Covid-19 epidemic.
A report by London-based research firm Capital Economics included that "the length of talks with the IMF indicates that some officials are reluctant to follow up on its demands and prefer to rely on the support provided by the oil-rich Gulf economies."
Changing the Acting Governor of the Central Bank
In this context, Egyptian President Abdel-Fattah El-Sisi decided last week to appoint the well-known banker Hassan Abdullah, who was a member of the secretariat of the policies of the dissolved National Party during the era of former President Hosni Mubarak, as acting governor of the Central Bank, succeeding Tariq Amer, who was appointed as an advisor to the president.
The reasons for Amer's departure were not officially known, but some local media reported that one of the reasons was "the failure to reach an agreement with the International Monetary Fund."
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