These days pass by the fourth anniversary of the liberalization of the Egyptian pound exchange rate for the first time in its history against the dollar, which incurred unprecedented heavy losses that negatively affected both citizens and the state.
As the decision consumed more than half of the savings value of all Egyptians, on the one hand, and led to a large and unprecedented wave of price increases.
The second half of their wealth and savings is at the mercy of prices.
And at the state level;
The country sank in a deep well of debt from which it is not expected to exit for decades to come;
Because of its reaching historical levels, and its span extends for about half a century.
In November 2016, the Central Bank of Egypt decided to liberalize the exchange rate of the pound, whereby the currency rate is determined according to the mechanisms of supply and demand, which is also known as floating currency.
What does float mean?
Before the decision to float, the central bank used to manage the exchange rate by using tools, including periodic bidding, to sell dollars to banks through which the exchange rate could be set.
But the float means that he abandoned this policy, and that he would leave determining the price of the currency to the forces of supply and demand in the market, and the dollar rose over the months following the float from 8.8 pounds until it touched 20 pounds.
Liberalization of the exchange rate is one of the main demands that the International Monetary Fund is demanding to finally agree to lend Egypt $ 12 billion over a period of 3 years.
The tone of the increase in monetary reserves - mostly debts - in Egypt, which rose, for the first time, to 45.246 billion dollars in October 2019, before falling to 39.22 billion dollars in October;
Because of the repercussions of the Coronavirus pandemic.
Liberalizing the exchange rate is one of the main demands that the International Monetary Fund is asking for in order to finally agree to lending to Egypt (Al-Jazeera)
Alarming numbers
But what about exports and imports, after rosy promises of rising exports and declining imports?
The figures refute those promises, as Egypt's imports during 2019 amounted to about $ 76.4 billion, compared to $ 68.1 billion in 2016, according to the Central Agency for Public Mobilization and Statistics.
Egypt's exports in 2019 amounted to only about $ 29.8 billion, compared to $ 21.7 billion in 2016.
That is, imports increased by about $ 8 billion, and so were exports.
Choose or have to
But was Egypt obliged to take this step, says Sherif Othman, a banking expert at the Washington Analytica Foundation in Washington, DC, that "floating the pound was necessary after the gap between the official and parallel market widened, and many mistakes were made in managing the post-float phase."
In his speech to Al-Jazeera Net, he explained that this led to the dollar price reaching more than 20 pounds, before foreign loans were used to give imaginary strength to the Egyptian pound.
The clear result of the float is to reduce the value of Egyptian assets to foreigners, according to the banking expert, and thus it facilitated their purchase of them;
This is what happened when a lot of land, real estate, hospitals, and some companies were sold to Saudi and Emirati investors in particular, at low prices.
In the conclusion of his speech, Othman emphasized that the flotation in and of itself does not benefit or harm;
However, the steps that follow the decision are the ones that can benefit the Egyptian economy and the Egyptians, which I have not really noticed so far.
Before the decision to float, the central bank was working to manage the exchange rate using tools, including periodic bidding, to sell dollars to banks (Al-Jazeera)
Growing poverty
So far, the Egyptian government has been reluctant to issue a new statistic about the poverty rate in the country, and the last official census returns during the period between 2016 and 2018, as the percentage of Egyptians below the poverty line increased to 32.5% (i.e. about 33 million Egyptians) compared to 27.8%.
On paper, the numbers are encouraging and inspiring optimism, but not for the Egyptians, but for the government, international financial institutions and donors, and the Egyptian government says that the economy grew 3.5% in the fiscal year ending on 30 June, and before the Coronavirus crisis, the government was targeting (high) growth ) At 5.8% in the fiscal year 2019-2020.
But with this growth - in the books - prices jumped, debts increased, and the support time ended, in contrast, wealth and savings decreased and wages fell, and the growth of companies and factories shrank with the growth of exports - despite their modest size - slightly.
Hole to well
In his comment, Egyptian-American businessman Mohamed Rizk says, "The answer to a question, why did the government float the Egyptian pound? The answer may seem easy; but it is much deeper than that .. The Egyptian government was forced to leave the protection it imposes on the valuation of the pound. Egyptian counterparts in exchange for foreign currencies, especially the dollar, to preserve cash reserves.
But he saw, according to his statement to Al-Jazeera Net, “that the float of the Egyptian pound did not solve the problem from its roots, so there was no urgent need to float the pound, and I likened it to Black Thursday. The main reason for the collapse of the Egyptian economy is if Egypt's access to foreign debts stops or its sources dry up for one reason or another.
The economist also went on to say that the flotation is the beginning of the real problems of the economy, and without the slightest doubt, the people only gained the evaporation of 60% of their savings, and the explosion of prices.
As for the government, and the conversation is still for a livelihood, it has exploited the flotation to attract hot money to invest in bonds and treasury bills with high interest, which is of little benefit to the economy, as well as entering into a debt spiral, whose services eat up more than a third of the annual state budget.
External debt rose rapidly and alarmingly, to $ 123.5 billion at the end of last June, compared to $ 108.7 billion at the end of June 2019, according to data issued by the Central Bank of Egypt.