Egyptian President Hosni Mubarak ordered his government on Monday to ease a shortage of local currency by injecting around 25 billion pounds (7.5 billion dollars) into the market in eight months, Information Minister Safwat al-Sherif told reporters.
The cash injection will take the form of "immediate payment" of government debts to public and private companies, Sherif said after a meeting between Mubarak, Prime Minister Atef Ebeid and economic sector ministers.
Egypt has been suffering from liquidity problems for several months, combined with economic stagnation, which has made it difficult to sell stocks of industrial and food products, government newspapers have reported.
The president ordered the money to be repaid at a minimum monthly rate of 2.5 billion pounds over a maximum time period of eight months starting in May, Sherif added.
He did not specify where the money would come from but said the funds would be drawn from "real resources." Inflation was 3.2 percent in December.
Economy Minister Yusef Butros-Ghali said at the weekend that such a move would be partly financed from central bank assets.
The state has accumulated large debts with construction companies and the national electricity company, mostly from financing mega projects such as the Toshka land reclamation in southern Egypt which aims to irrigate desert land with waters from the Nile.
Chief editor of the government Al-Ahram newspaper Ibrahim Nafie put part of the blame for the current monetary crisis on the government along with banks and businessmen, in an editorial published Friday.
Nafie, who is close to Mubarak, cited "vast spending on several different mega projects at once" and "extending credit to investors without studying the possibility of repayment" as factors in the crisis.
The lack of liquidity in Egyptian pounds has been compounded over the past year by high demand for the dollar and difficulties in exchanging the pound, which has forced the government to draw on its foreign currency reserves.
The central bank's foreign reserves have fallen from 20.00 billion dollars in November 1998 to 15.63 billion dollars in December 1999.
According to brokers on the Cairo stock exchange the pressure on the Egyptian pounds is due to the drop in direct foreign investment, bad credit management by state banks, and a stagnation in exports despite recent rises in tourism and oil sector receipts -- CAIRO (AFP)
© 2000 Al Bawaba (www.albawaba.com)
