Marketing-Börse PLUS - Fachbeiträge zu Marketing und Digitalisierung
print logo

IMF’s Lagarde says there is a ‘crisis’ in Egypt’s currency market

Egypt is turning to the IMF as it seeks to restore investor confidence in an economy that’s been undermined by persistent political unrest.
30.10.16 | Source: Gulf News

IMF Managing Director Christine Lagarde said Egypt is facing a currency crisis that should be tackled based on local circumstances, though history shows that “rapid” exchange-rate action works best in countries with low reserves and a wide gap between official and black market rates.
The most populous Arab country is gripped by a foreign-currency shortage that has battered business activity and raised fears of spiralling inflation. Lagarde said this month that Egypt needs to address exchange-rate and subsidy policies, fuelling speculation that policymakers will either devalue or float the pound and raise energy prices before securing IMF support.
“In terms of exchange rates, there is currently a crisis, because if you look at the official price and you look at the grey market price, there is a 100 per cent difference — and that needs to be addressed,” Lagarde said in an interview with Bloomberg Television in Riyadh on Thursday.
“When you have very low reserves, when the difference between the official and unofficial rate is very wide, historically, we have seen rapid transitions being most efficient, but it’s really a matter of circumstances. In other cases, it has been gradual.”
Egypt is turning to the IMF as it seeks to restore investor confidence in an economy that’s been undermined by persistent political unrest since the Arab Spring uprising. Many investors and tourists have shunned the country since then, putting pressure on foreign-currency reserves, which have tumbled more than 40 per cent since 2011.

FREE NEWSLETTER