by Marwa Yahya
CAIRO, May 30 (Xinhua) -- Facing a U.S. dollar crunch that led to the depreciation of the local currency and a slowdown of imports, Egypt is seeking all kinds of ways to secure dollars and even considering adopting other currencies in trade.
Despite a steady hard currency income from the Suez Canal fees and tourism profits, Egypt is still struggling to finance the increasing expenditure on food subsidies for 70 million people out of its 105 million population.
The ongoing Russian-Ukrainian conflict that started in early 2022 caused a record rise in the prices of food and fertilizers, dealing a heavy blow to Egypt, one of the world's largest grain importers.
The 3 billion U.S. dollars Egypt secured from the International Monetary Fund spanning 46 months could do little to alleviate the situation when its debt service alone amounts to 42 billion dollars for 2022-2023.
Abu Bakr al-Deeb, advisor to the Cairo-based Arab Center for Research and Studies, noted that apart from the ongoing Russian-Ukrainian conflict, the U.S. Federal Reserve rate hikes, the Western sanctions on Russia, and the withdrawal of hot money from Egypt are all adding pressure on the Egyptian pound.
He added that, in addition to these external factors, Egypt imports commodities worth 100 billion dollars annually while its exports earn only 40 billion dollars, further compounding the dollar crisis.
Meanwhile, Egypt's currency has been on a trajectory of plummeting depreciation, devaluated three times in 2022. The U.S. dollar is trading in banks at 30.8 Egyptian pounds, compared to about 40 pounds in the black market.
Al-Sayed Gazar, another economic expert, said that Egypt has been pursuing several means to secure dollars, from granting foreign investors renewable one-year residence, charging tourists in dollars or euros for train rides, and considering offering the shares of companies registered in Egypt's stock market.
Furthermore, Egypt needs to improve its manufacturing capacity and open new markets for Egyptian products, Gazar added.
Last month, Ali El-Meselhi, the Egyptian minister of supply and internal trade, announced that his ministry is considering adopting its trade partners' local currencies when doing business with India, China, and Russia.
"It will be a very important move to curtail the dependence on the U.S. dollars, which constitutes 90 percent of the international trade," al-Deeb added.
There is a tendency to change the map of money trading and get rid of the dollar hegemony across the world, he added, noting that the promotion of new currencies could be a strategic exit from the dollar domination via increasing coordination among the BRICS group and adopting local currencies in bilateral trade deals.
However, "there is no substitute for expanding production by increasing investment and industrial opportunities in the coming period to tide through the violent financial crisis in Egypt," Gazar said.