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Egypt currency fears lead to dollar rush

Cairo, Dec. 25 (AP): Egypt today edged deeper into economic crisis with some worried residents hoarding dollars for fear that the local currency could weaken significantly.

The anxiety over the economy was visible at currency exchanges in the upscale Cairo neighbourhood of Zamalek, which ran out of dollars by midday and offered only euros — a rare occurrence. Some banks, too, said they had run out of cash dollars, forcing people to seek foreign currency from exchanges around the city.

“I asked around in many exchange places and can’t find dollars anywhere,” said Cairo resident Mahmoud Kamel after unsuccessfully visiting one exchange office in Zamalek. “I want to exchange money because I’m afraid the Egyptian pound will not have any value soon.”

Both political instability and economic fundamentals are playing a role in Egypt’s growing financial distress. A Constitution drafted by President Mohammed Mursi’s allies deeply polarised the country and sparked huge street demonstrations that at times exploded into deadly violence.

The dash to sell Egyptian pounds for dollars prompted the Central Bank of Egypt to issue a statement yesterday calling on banks not to listen to rumours circulating about the fiscal health of the nation.

In a statement carried on official news websites, the bank declared its commitment to guarantee all deposits in local and foreign currencies to banks in Egypt and said banks are “financially strong enough and have stable liquidity to ensure the fulfillment of any obligations toward all its clients”.

There was one particularly nerve-rattling report in recent days that longtime Central Bank governor Farouk Okdah had resigned. The report came on Saturday during the second and final round of voting on the constitutional referendum.

Official media quickly retracted the news after reporting it. The governor then turned up at a meeting of the government’s economic team on Sunday in an apparent attempt to quell nervousness over the state of the economy.

Egypt’s currency had been stable trading around 6 pounds to the dollar for the first half of the year. It has since slipped. The Central Bank of Egypt said today that the dollar was selling at 6.18 to the Egyptian pound. To buy dollars at currency exchanges, the rate was 6.20.

Charter approved

Egypt’s new Constitution, drafted by Mursi’s Islamist supporters, has been approved by 63.8 per cent of voters in a two-round referendum, the supreme election committee said today.

The result, which followed votes held on December 15 and on December 22, matched an earlier unofficial tally given by Mursi’s Muslim Brotherhood.

 
 
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