CAIRO, 2 January 2004 — The fall in the value of the Egyptian pound last year has stimulated exports but at current volumes the impact on the overall economy is relatively small, Foreign Trade Minister Youssef Boutros-Ghali said on Wednesday.
The Egyptian pound has lost a quarter of its value against the dollar since it floated in January and Central Bank figures show exports other than oil rose about 17 percent in the middle six months of 2003 compared to the same period the year before.
Boutros-Ghali said he thought the export boom since January would be about 25 percent and the change in the exchange rate had transformed the prospects for Egyptian exporters, whom the government has traditionally neglected in favor of production for the domestic market. “Anyone who has anything that is remotely related to international standards is exporting. You see it in foodstuffs, agricultural produce, engineering goods, white goods, consumer durables...practically anything, including things that we had no idea could be exported, like paper scrap,” the minister told Reuters in an interview.
The Egyptian government says it is committed to export promotion to redress the country’s longstanding deficit in the trade in goods. But importers have also complained that bureaucratic obstacles undermine their efforts. Egyptian exports cover only about a half of the import bill and the country makes up the balance through tourism, Suez Canal revenues and remittances from Egyptians working abroad. Boutros-Ghali said the value of non-oil exports had grown to 12 percent of gross domestic product (GDP) from four percent four years ago but even at this rate of growth the effect would not immediately filter down into the domestic economy.
Prime Minister Atef Obeid said this week that the Egyptian economy grew 4.2 percent in 2003. Real growth in the financial year ending June 2003 was about 3.1 percent.
“It will take time for exports to be felt economy-wide because the sector is small. In a couple of years, it will represent a significant portion of GDP and then it will have a significant impact,” he said.
The fall in the value of the pound has disrupted trade to some extent because of uncertainty about where the pound might be heading and because some exporters have been reluctant to make their foreign exchange earnings available for imports.
Boutros-Ghali said the exchange rate system, which bankers have called a managed float, was going through a period of transition on its way to a completely free flotation. He said the appointment last month of a new Central Bank governor, Farouk El-Okdah, should speed up the process.
“The previous governor of the central bank (Mahmoud Abu El-Ayoun) was not very much up to date on the different aspects of monetary policy. So we sort of took a few wrong turns here and there. It will settle down,” he said.