Econostrum | Economic News in the Mediterranean

Egypt's central bank governor throws in the towel amid economic meltdown

Written by Frédéric Dubessy on Thursday, August 18th 2022 à 15:41 | Read 312 times

Tareq Amer becomes economic adviser to the President (photo: DR)
Tareq Amer becomes economic adviser to the President (photo: DR)
EGYPT. As the national currency continues to plunge, inflation reaches 15% and food prices soar, the governor of the Central Bank of Egypt (CBE) decided to resign on Wednesday 17 August 2022.

In office since 27 November 2015, when he succeeded Hisham Ramez, who also resigned, Tareq Amer was due to finish his term (renewed in January 2020) in 2023. President Abdel-Fattah Sissi accepted this withdrawal on the eve of the meeting of the CBE's Monetary Policy Committee, which is to decide on the main key rates. He also appointed him, by decree, as a presidential advisor.

"I would like to thank President Al-Sisi for supporting me throughout my tenure as CBE Governor. I have resigned to make room for new blood to take responsibility and advance the process of Egypt's successful development under the leadership of the president," Tareq Amer said in a statement. The name of his successor is still awaited.

In August 2017, he was named "Central Bank Governor of the Year" for the Mena region (Middle East/North Africa) by GlobalMarkets, the journal of the IMF and the World Bank.

The inexorable fall of the Egyptian pound

The Egyptian pound is at its second historical low. The record was recorded during the winter of 2016. On Wednesday 17 August 2022, it was trading at 19.1 pounds to the dollar (19.39 to the euro) compared to 15.6 pounds to the dollar in March 2022. This level had only been reached in the winter of 2016. The currency was devalued again, by 17% on 21 March 2022, without managing to halt its decline.

The CBE liberated the exchange rate of its currency in November 2016, which led to a 48% drop in its rate against the dollar in one day. However, the operation allowed it to become eligible for a three-year loan of $13bn from the International Monetary Fund (IMF). At the time, the central bank justified the floating of its currency by its desire to "ensure monetary and budgetary stability" and to reconstitute its stock of foreign currency.

Inflation is worsening due to a rise in food prices of up to 66%. This has a strong impact on the purchasing power of Egyptians. The World Bank estimates that 30 million Egyptians (out of a total population of 103 million) are considered poor.

Foreign exchange reserves at their lowest

After the economic consequences of Covid-19, the country had to face those of the war in Central Europe. Egypt is the world's largest importer of wheat and its two main suppliers are Ukraine and Russia. It imports 80% of its wheat from these two countries.
"The trade sanctions imposed on Russia and the corresponding bottlenecks in the supply chain have pushed up global commodity prices, such as oil and wheat prices," the Central Bank's Monetary Policy Committee said in a statement on 23 June 2022.

Public finances are in a bad way with a public debt of 90% of GDP. Foreign currency reserves (US dollar, euro, Australian dollar, yen and yuan) are melting and have fallen from $41 billion in February 2022 to $33.3 billion at the end of June 2022 and $33.14 billion at the end of July 2022, according to figures from the Central Bank.

Cairo is in discussions with the International Monetary Fund to obtain a new loan. At the end of July 2022, the institution had estimated that Egypt had to make "decisive progress" in fiscal and structural reforms.

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