Obama advisor submits proposals for Egypt’s currency crisis

Egypt’s central bank official Mohamed al-Erian has submitted a paper of proposals to “high-level” state bodies to resolve the current US-dollar shortage, sources have told Al-Masry Al-Youm.

Erian, a chairman of US President Barack Obama’s Global Development Council, was appointed last November as a member of the Central Bank of Egypt’s policy coordinating panel.

Among the range of advice made by Erian is a warning against floating the Egyptian currency except in coincidence with "decisive economic decisions".

Such decisions could include adjusting imports based on priority, diconnecting the Egyptian pound from the dollar, basing it instead on a basket of currencies, and raising interest rates on Egyptian pounds to avoid “dollarization.”

The same sources said CBE governor Tarek Amer had also received reports from “outstanding” monetary experts, including recommendations for a way out from the crisis, adding that the reports were made upon “request from a sovereign state body.” The reports recommend the cancellation of a dollar deposit cap imposed on companies, as well as taking floatation measures similar to those adopted in 2003, also to avoid dollarization.

Amer was advised to request pointers from former finance minister Youssef Boutrous Ghali and former investment minister and current World Bank official Mahmoud Mohie Eddin.

On Tuesday, the CBE increased limits on foreign currency deposits at banks for individuals, a measure aimed at resolving the dollar drought in the market and comatting shadow foreign-exchange dealers reportedly quoting rates above LE9 for the US dollar.

Egypt’s reserves fell from US$36 billion in 2011 to $16.5 billion at the end of February and the central bank has been rationing dollars through weekly auctions.

Edited translation from Al-Masry Al-Youm

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