Egypt suffering currency 'crisis', says IMF chief

Egypt suffering currency 'crisis', says IMF chief
IMF chief Christine Lagarde said Thursday that Egypt is going through a currency "crisis," suggesting a quick devaluation and further austerity measures, as public anger over government cuts grows.
2 min read
28 October, 2016
Egypt has introduced tough austerity measure to qualify for an IMF loan [AFP]

IMF chief Christine Lagarde said Thursday that Egypt is going through a currency "crisis," suggesting a quick devaluation to tackle a widening gap between the official and black market rates.

Egypt has been struggling to shore up its foreign currency reserves in the political and economic turmoil following the January 2011 uprising that toppled former ruler Hosni Mubarak.

The government of President Abdel Fattah al-Sisi is rolling out an austerity programme and is seeking billions in support from abroad in order to meet conditions for a $12 billion loan from the International Monetary Fund and boost investor confidence.

The country's foreign currency reserves stood at $19.6 billion in September, an increase from previous years but less than 50 percent of the level in early 2011.

"In terms of exchange rate, there is currently a crisis, because if you look at the official price if you look at the grey market price, there is a 100 percent difference so that needs to be addressed," Lagarde said in an interview with Bloomberg Television.

Lagarde applauded the planned reforms, including the austerity programme, saying the IMF was ready to support the government if it takes the measures needed to meet the loan conditions.

"If they decide to move forward we will certainly support that move, we will certainly accompany it, we'll put money on the table to help them along the way. But it's their call and it's their decision," she said.

Egypt has already instated a series of austerity measures including cuts to fuel and electricity subsidies to narrow the budget deficit, which have been accompanied by some haphazard measures with an eye to assuaging public discontent.

With rising food prices, authorities on Sunday raided a Twinkies snack cake factory and confiscated 2,000 tonnes of its sugar stocks, saying it will resell seized stocks at lower prices.

However, patience in the country has begun to wear thin and authorities are increasingly nervous about the possibility of public anger boiling over into the streets.

The Egyptian presidency has issued near-daily statements saying Sisi is instructing ministers to ensure the availability of basic staples at affordable prices and to prosecute any merchants found to be hoarding food supplies, in a sign of growing government anxiety over public discontent.

Agencies contributed to this report