Morsi rejects IMF Advice on Devaluation
Egyptian President Mohamed Morsi announced that he would not consider raising taxes or devaluing the currency in order to promote economic recovery, relying instead on investment, tourism, and exports
Source : https://www.marocafrik.com/english/Morsi-rejects-I...
Although devaluing the currency would help stop the plunge of Egypt’s foreign exchange reserves, it would also lead to inflation at a time when many Egyptians are already facing economic hardship. The decision goes against the recommendations of the International Monetary Fund (IMF), from which Egypt requested a $4.8 billion loan last week according to the business web site Nuqudy.com
Devaluing the currency would be a logical step, and it would also make Egyptian exports more attractive. Nearly half of Egypt's population lives on less than 2 dollars a day. Increased inflation would force Egyptians to face higher prices at the same time that the government is reconsidering subsidies on basic goods. When asked about a possible devaluation, Morsi said, “No. Definitely not. This is completely out of the question.”
Devaluation would make imports more expensive, a problem in a country that relies on imports for wheat, sugar, tea, and other staples. The Egyptian government rejected the IMF loan in 2011 and it is known to be unpopular with many of the Muslim Botherhood and the salafist Al-Nour party who hold the majority of parliamentary seats do not favour western financial institutions like the IMF. Further austerity could threaten an already fragile public order situation with a population of well over 80 million. Morsi also said that he would not introduce new taxes. “There are no new taxes that will be imposed on the Egyptian people during this period” he said.
He prefers to rely on increased foreign investment and tourism and boost economic development.. “The main axis is investment, encouraging investors, tourism, foreign trade, exports. That is what we are aiming for more than loans,” he said.
Devaluing the currency would be a logical step, and it would also make Egyptian exports more attractive. Nearly half of Egypt's population lives on less than 2 dollars a day. Increased inflation would force Egyptians to face higher prices at the same time that the government is reconsidering subsidies on basic goods. When asked about a possible devaluation, Morsi said, “No. Definitely not. This is completely out of the question.”
Devaluation would make imports more expensive, a problem in a country that relies on imports for wheat, sugar, tea, and other staples. The Egyptian government rejected the IMF loan in 2011 and it is known to be unpopular with many of the Muslim Botherhood and the salafist Al-Nour party who hold the majority of parliamentary seats do not favour western financial institutions like the IMF. Further austerity could threaten an already fragile public order situation with a population of well over 80 million. Morsi also said that he would not introduce new taxes. “There are no new taxes that will be imposed on the Egyptian people during this period” he said.
He prefers to rely on increased foreign investment and tourism and boost economic development.. “The main axis is investment, encouraging investors, tourism, foreign trade, exports. That is what we are aiming for more than loans,” he said.
Source : https://www.marocafrik.com/english/Morsi-rejects-I...