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Egyptian PM pledges to end currency crisis

Sherif Ismail told parliament that a previous currency adjustment had happened "without proper instruments" and brought about negative effects.

Published: Updated:

Egyptian Prime Minister Sherif Ismail told parliament on Monday the government was working with the central bank to bring an end to the discrepancy between the official and parallel market exchange rates for the Egyptian pound.

Ismail said that a previous currency adjustment, a reference to a 14 percent devaluation in March, had happened "without proper instruments" and brought about negative effects.

The Egyptian pound has been falling on the black market since the 2011 revolution drove away tourists and foreign investors, vital sources of hard currency in an economy that relies on imports of everything from food to luxury cars.

The central bank has been rationing dollars and imposing capital controls as it maintains an artificially strong pound at 8.8 per dollar but traders said on Monday the rate was 18-18.2 on the parallel market compared to 16.1 pounds last week.

"We appreciate the country's situation. We are going through a very tough situation," Ismail told members of parliament.

The pound has been tumbling almost daily on the black market since Saudi Arabia halted petroleum aid to Egypt this month, forcing it to spend $500 million for oil products on the spot market.

Egypt is waiting for IMF board approval of the three-year program. In return, Egypt must carry out economic reforms, including a devaluation of the pound and painful subsidy cuts.

The central bank devalued the pound by almost 14 percent in March, briefly closing the gap with the black market. The renewed weakening has increased pressure on the central bank to devalue again.

The country has been trying to rebuild its reserves, which are currently around $19.5 billion, far lower than the $36 billion in 2011.