Egypt’s central bank governor resigns a year early

Mohamed Abd El Ghany

• Tarek Amer has been appointed as a presidential adviser
• Egypt’s bonds suffered a sell-off on international debt markets  

Egypt’s central bank governor Tarek Amer has submitted his resignation, the office of President Abdel Fattah Al-Sisi said on Wednesday, just over a year before the completion of Amer’s final term.

There was no announcement of a replacement for Amer, who has been appointed as a presidential adviser. The central bank governor is one of the most powerful roles in the Egyptian government, and it was not immediately clear if Amer had resigned or been sacked.

State TV said he had stepped down, “to allow others to complete the successful development process under the leadership of the president”. It gave no further details.

Egypt’s government bonds suffered a sell-off on international debt markets after the news of the unexpected resignation, with falls of up to 1.7 cents on the dollar.

Under Amer’s tenure, Egypt saw two currency crises, in 2016 and 2022, and was hit by the twin shocks of the coronavirus pandemic and the Russian invasion of Ukraine. His central bank also raised interest rates to among the highest levels in the world, attracting large foreign inflows that quickly dried up early this year.

His resignation came ahead of a monetary policy committee meeting on Thursday evening where analysts polled by Reuters had expected the overnight deposit rate to be raised by 50 basis points (bps) in order to keep inflation in check.

Amer leaves in the middle of negotiations for fresh financing from the International Monetary Fund, which last month said Egypt needed to make “decisive progress” on fiscal and structural reform, arguing for greater exchange rate variability.

Egyptian Finance Minister Mohamed Maait said late last month that the talks had made “very good progress.”

“If Egypt is eyeing sealing a deal then a governor adopting a more flexible exchange rate would likely advance talks with the IMF,” said Sara Saada, senior economist at CI Capital.

Currency Depreciation

In comments to state-controlled Al-Ahram newspaper earlier this month, Amer blamed liberal economic policies from the early 2000s for draining Egypt of foreign exchange and impacting industry.

When the coronavirus pandemic broke out in early 2020, the central bank pursued an unconventional strategy of raising interest rates on domestic deposits, lowering domestic lending rates and allowing the currency to remain almost unchanged against the dollar.

Amer said in December at a conference of Middle Eastern central bankers that monetary authorities felt a weaker exchange rate would not bring back tourists or boost exports.

But following US interest rate hikes and the invasion of Ukraine, the central bank allowed the currency to depreciate by about 15 percent in March and in recent months gradually weaken further.

On Wednesday, the pound was trading at about EGP19.10 to the dollar. Meanwhile, annual urban consumer inflation accelerated to 13.6 percent in July from 13.2 percent in June, a three-year high.

Between February and the end of June, foreign investors pulled EGP158.9 billion ($8.3 billion) out of Egyptian treasury bills and additional funds out of treasury bonds of more than one year.

“The central bank over the last few years has kept interest rates high and fixed the exchange rate to attract hot money, which was used to fix the exchange rate,” Egyptian economic commentator Hany Tawfik told Reuters.

Flexible Exchange

Jason Tuvey, senior emerging markets economist at Capital Economics, said Amer may have been trying to let the currency float more freely.

“I think what we’ve seen in recent months is some sort of balance trying to be struck between Amer on the one side trying to pursue a more flexible exchange rate and, on the other side, policymakers within government pushing for a tight grip on the currency, leading to other unconventional measures trying to support the external position,” Tuvey said.

The central bank angered businessmen by imposing controls on imports earlier this year. But deputy governor Gamal Negm said on Saturday this helped narrow the foreign currency gap, ruling out any considerable devaluation soon.

Amer, whose background was in banking, served as deputy central bank governor and chairman of Egypt’s largest lender before being appointed to a four-year term as governor in November 2015. He was reappointed in November 2019. The post has a two-term limit.