Egypt’s priority is meeting the basic needs of its population and curbing inflation, the central bank’s governor said, as demonstrators targeted the country’s economic managers.
“The most important thing is to cover our essentials,” Hisham Ramez told reporters in Dubai, adding that his job was to monitor inflation and “preserve the reserves as much as possible.” His comments came as rising prices, along with rash of food poisoning that infected hundreds, sparked renewed protests against the government of President Mohamed Mursi.
Egypt has struggled to pay for subsidized fuel and other goods as its currency reserves dwindle, and shortages in the market have added to the unrest that has built up since Mursi’s election in June. The economy is growing at its slowest pace in two decades, the currency has plunged and international reserves are more than 60 percent below their December 2010 levels.
The Finance Ministry in Cairo came under attack by protesters today, including state-employed tree trimmers objecting to their pay, Cairo police Major Mustafa El-Sherbagy said by phone. Another group of demonstrators stormed the Supply Ministry, hours after the government raised the price of subsidized butane canisters used in households and by businesses, Al-Jazeera’s Egyptian channel said.
With many of the protests pinned on dashed expectations of an improvement in living standards and wages after Hosni Mubarak’s ouster in 2011, the government has set its sights on obtaining financing to help tackle a budget deficit projected at almost 11 percent for the current fiscal year.
Planning Minister Ashraf El-Arabi said today he expects Egypt to reach an initial deal with the International Monetary Fund on a long-stalled $4.8 billion loan request during a forthcoming visit by an IMF team, due to start April 3.
“I’ll believe it when I see it,” Lutz Roehmeyer, a Berlin-based fund manager at Landesbank Berlin Investment and a former investor in Egyptian debt, said by phone today. “Foreign investors are a little bit annoyed of this kind of discussions because you can discuss endlessly.”
“It’s not discussions that Count, but implementation of reform measures and IMF money flowing and we don’t see that,” he said.
El-Arabi also told the Arabiya satellite channel that the government aims to raise its reserves to about $16 billion by the end of June. That’s a more modest target than the $19 billion outlined in an economic program weeks earlier.
To help curb the slide in foreign reserves, the central bank introduced foreign currency auctions at the end of December, limiting the amount of dollars available. The move precipitated a 9.1 percent drop in the value of the pound against the dollar.
That decline helped push Egypt’s inflation rate to 8.2 percent in February, from 4.7 percent at the end of last year, as import costs rose. It has also fed a black market, raising costs for some businesses.
“I will not run after the black market,” Ramez said. “At the right time, with the right tools, the black market will disappear like it disappeared before.” He didn’t specify what measures the bank may take.
The bank today sold 14 billion pounds ($2.1 billion) of deposit agreements, a day after it said it would reintroduce the contracts to absorb excess bank funds. The deposits allow lenders to place their money with the central bank in return for a fixed annual interest rate of 10.25 percent.
Ramez said the regulator would also continue with the foreign currency auctions and will use other tools “at the right time.”
Political tensions between Mursi’s secular critics and his Islamist supporters have affected virtually every aspect of daily life in Egypt. Clashes and demonstrations over the past couple of months have left dozens dead and hundreds more wounded, while protests build over rising prices, wages, a lack of security, contentious court rulings and, in the most recent example, food poisoning.
Students at Al-Azhar University, the Sunni Muslim world’s pre-eminent religious institution, staged a mass demonstration today after more than 500 of their colleagues were taken ill. The prosecutor general has ordered an investigation while Mursi paid the victims a surprise visit, the state-run Middle East News Agency reported.