Pound rises against the dollar, Central Bank governor steps down

Central Bank of Egypt Governor Hesham Ramez, who submitted his resignation last month, has stepped down and appointed the bank’s deputy governor, Gamal Negm, as caretaker, state-owned Ahram reported. 

Citing a CBE spokesperson, Al-Ahram stated that Ramez was on leave as of Wednesday and Negm will serve in his place until Ramez’s original term expires November 26.

The news comes the same day the Egyptian pound strengthened against the dollar by 20 piasters in the Central Bank’s currency auction, bringing its official value back up to LE7.73 to the dollar.

In commentary sent out Wednesday afternoon, investment firm Pharos noted that former CBE governor Farouk al-Oqda introduced surprise pound appreciations in the 2004/5 fiscal year, bringing two-way volatility into the exchange market and making it harder for currency traders to predict whether the pound’s official value would rise or fall. When the pound is seen to be in a continuous slide, speculative demand increases and people have little incentive to give up their dollars. Tarek Amer, who will assume the role of CBE governor later this month, was Oqda’s deputy.

The Central Bank has promised to inject more dollars into the banking system. However, the stronger exchange rate is a surprise to analysts, who have predicted the pound will continue to devalue as Egypt struggles with a currency shortage.

Egypt’s foreign reserves grew slightly in October, but still stand at just US$16.4 billion, lower than the US$18.1 billion recorded in August, and substantially below the $36 billion the country held before the revolution.

Egypt’s tourism industry is reeling in the wake of the fatal crash of a Russian airliner in Sinai, with countries like the United Kingdom and Russia suspending flight services and individual tourists expected to cancel bookings for Egypt. A prolonged downturn in the tourism industry will have a serious impact on Egypt’s future supply of foreign currency.

The Suez Canal, another traditional source of dollars for Egypt, has also taken a downturn in recent months, with revenue falling despite the high-profile launch of an expansion project this summer.