CAIRO: The central bank said on Saturday that growth which had been forecast at 6 percent would be hit by Egypt’s political crisis and outflows could hit $8 billion in two weeks but Egypt had reserves and experience to deal with it.
Speaking on the evening before banks open on Sunday after being closed for a week due to anti-government protests, Governor Farouk El-Okdah said Egypt’s reserves were adequate at $36 billion, the figure at the end of December.
Protests, which erupted on Jan. 25, have shaken the country’s political system and have rattled investors.
"Of course, over the next week we will have some problems but we will be able to handle them because we have had experience before," the governor told state TV, adding reserves could cover imports for 9.5 months, more than most states.
He said there could be outflows of about $8 billion from Egypt within two weeks but the country could deal with this as it had dealt with bigger outflows in the past such is in 2008, during the world financial crisis.
"The market will open … and the most important thing is to have an orderly market," he said, adding that US dollars would be available in the market and the banks were liquid.
"I am confident that the market will be orderly," he said, dismissing any suggestion that a black market could develop.
The governor said investors had shown confidence in the currency for six years, referring to the period when the pound was allowed to float more freely against the US dollar.
Bankers say capital flight could be massive in the days after the banks reopen. Shortly before they closed, currency traders estimated some $500 million or more was leaving the country daily, and political violence has worsened since then.
"This is not an economic crisis, it is a political crisis with an impact on the economy," the governor said.
He said crisis would hurt economic growth, that had been expected at 6 percent, because of the impact on tourism, foreign investment and other factors. But he said he could not now give a figure for what growth would be.
The pound could move, but he said any fluctuation would be a "natural movement." He also said: "The pound is still strong."
The pound had weakened to six-year lows in the two days the market was open after the first protest on Jan. 25.
The central bank has been seeking to reassure investors.
But the stock exchange’s sudden decision on Saturday to stay closed on Monday next week, instead of reopening as originally planned, suggests authorities are not confident that the financial system will resume smooth operations quickly.
Egypt had been drawing in investors, attracted by its sturdy growth rates, which even in the world downturn had hovered just below 5 percent a year and had since climbed to six percent.
