Egypt’s central bank governor resigns as economic woes mount

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CAIRO — Egypt’s central bank governor resigned on Wednesday as the Middle East’s most populous nation struggles to rein in inflation sparked by Russia’s war in Ukraine, high oil prices and a drop in tourism .

President Abdel Fattah el-Sissi has accepted Tarek Amer’s resignation and appointed him presidential adviser, the Egyptian leader’s office said in a statement. The brief statement offered no explanation for Amer’s resignation.

No replacement was immediately named for Amer, who was appointed central bank governor in November 2015. He has been criticized for his handling of Egypt’s financial challenges.

The currency is under pressure, its value slipping to over 19 Egyptian pounds to the dollar. This follows a central bank decision allowing the currency to depreciate by around 16% in March in an attempt to stem a growing trade deficit.

“There seems to be a lot of tension in political circles, and I think that’s ultimately what led to Mr. Amer’s resignation,” said Jason Tuvey, senior emerging markets economist at Capital. Economics.

Tuvey said some officials oppose the devaluation of the pound and instead support measures such as rationing gas consumption by limiting electricity consumption, which in turn could harm business activity. Amer was traditionally seen as part of the camp that supported depreciating the pound as a means of obtaining a loan from the International Monetary Fund.

London-based research firm Capital Economics predicts the Egyptian currency will continue to decline, hitting 25 pounds to the dollar by the end of 2024 amid sustained pressure.

The central bank chief’s resignation comes after key ministries shuffled on Saturday as the government faces mounting pressure from economic challenges. The cabinet reshuffle, which was approved by parliament in an emergency session, affected 13 ministries, including health, education, culture, local development and irrigation. The country’s minister of tourism and antiquities has also been replaced.

Egypt’s vast tourism industry, which employs millions, has been hit hard by years of unrest, the COVID-19 pandemic and then the war in Ukraine. Before the conflict, about a third of tourists to Egypt came from Russia.

Russia’s war has been deeply felt in other ways in Egypt, the world’s largest wheat importer that sources about 80% from the Black Sea region.

In the first weeks after the invasion of Ukraine in late February, the price of wheat and other grains soared, as did the price of fuel. Although prices have come down somewhat, the cost of grain is still at least 50% higher than before the pandemic in early 2020. In addition, the cost of sea transport to export this grain via the Black Sea is high.

Inflation in the country of 103 million people hit 14.6% in July, increasing pressure on low-income households and basic necessities. About a third of Egyptians live in poverty, according to government figures.

The World Bank notes that the Egyptian government announced an aid package worth 130 billion pounds (more than $8 billion) just before devaluing the pound in March to mitigate the impact of rising prices. . The package aimed to raise public sector wages and pensions, as well as expand direct cash assistance schemes.

Egypt’s Gulf Arab allies came to its aid with multi-billion dollar investments backed by high oil prices which helped its bottom line.

Saudi Arabia’s sovereign wealth fund, known as the Public Investment Fund, recently established a division in Egypt which has already announced deals worth $1.3 billion with the aim of bringing in $10 billion in Egypt.

Batrawy reported from Dubai, United Arab Emirates.

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