Egypt needs less focus on currency valuation amid economic struggle, says El Erian

Egypt’s officials should put less focus on the valuation of the local currency as they try to solve the country’s economic problems, said Mohamed El Erian, the former chief executive at Pacific Investment Management.

“Egypt does not produce enough, needs continuous electricity, reform of the tax system and pro-growth measures to reduce the deficit,” Mr El Erian said at the Global Financial Markets Forum in Abu Dhabi. He is a member of a recently-revived council which coordinates policies between Egypt’s government and the central bank.

The pound’s valuation is neither the main problem nor the main solution, he said.

Egypt has been facing a foreign currency shortage that has weighed on the nascent economic recovery.

Authorities have introduced measures to reduce imports, raised interest rates and put capital controls in place to save hard currency.

On Thursday, the Egyptian pound held steady against the dollar at an official foreign currency auction but weakened significantly on the black market.

The central bank sold US$38.8 million at a cut-off price of 7.7301 pounds to the dollar, unchanged from the previous auction.

But the black market rate jumped, with traders quoting 9.50 pounds to the dollar, compared with a range of 9.30 to 9.34 to the dollar on Tuesday.

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