Global Courant
Economists discussed the various benefits that the Egyptian economy can receive from the currency exchange agreement signed with the UAE on Thursday.
Egypt and the UAE have signed an agreement that will allow the two sides to exchange the Egyptian pound and the UAE dirham, with a face value of up to LE42 billion or AED five billion.
According to one economist, the deal meets Egypt’s needs for services and goods, while another says it reduces pressure on demand for US dollars in Egypt.
It comes under the efforts to strengthen close relations between the two countries at all levels, which contributes to facilitating and increasing the volume of trade exchange between them, the Emirates News Agency quoted Central Bank of Egypt Governor Hassan Abdullah.
And the Governor of the UAE Central Bank, Khaled Mohamed Balama, stated that the agreement reflects the depth of bilateral relations between the two countries.
It represents an important opportunity to develop economic and financial markets between the two sides in all areas, he said, which will have a positive impact on the commercial, investment and financial sectors and improve financial stability.
What is the economic impact of exchanging the Egyptian pound with the Emirati dirham?
The economic benefits for Egypt from the Egypt-UAE agreement were explained by economic expert Rashad Abdo, the chairman of the Egyptian Forum for Economic and Strategic Studies, in exclusive statements to Al-Masry Al-Youm.
According to Abdo, the currency exchange agreement kills three birds with one stone.
The agreement meets the needs of the Egyptian people for goods and services, at the same time relieving pressure on the US dollar and allowing the export of local products by operating factories, increasing productivity and, most importantly, saving foreign exchange, he said.
“In this way, we will increase our exports and meet our needs without paying for foreign currency,” Abdo continued.
This step also requires providing production suitable for export at a low price and with high efficiency, which is considered appropriate preparation before the activation of the BRICS currency, he added.
Egypt had previously managed a similar experience with China about five years ago, with Egypt exchanging US$2.62 billion into the national currency, instead of the US dollar.
“Similarly, in the UAE agreement, we do not need central bank dollars in this case,” Abdo explained.
“If this experience with the UAE proves to be a success, it could be expanded to other countries.”
The currency exchange deal will help Egypt reduce the burden of importing US dollars, banking expert Ahmed Shawqi told Al-Masry Al-Youm.
Egypt’s exports to the UAE amount to about $1.8 billion, while imports amount to $2.9 billion, he added.
The decision will help reduce the trade deficit within the balance of payments, saving approximately $1.4 billion as a result of reducing taxes on all goods.
Shawqi explained that Egypt, for example, does not have to pay for fuel and oil imports in US dollars.
The decision is useful to reduce pressure on the dollar by creating bilateral transactions in other currencies, he added.
It is a general trend for countries around the world to now move away from trading the US dollar and diversify among a basket of different currencies, reducing the US dollar’s dominance as a currency, Shawqi noted.
The currency exchange deal with the UAE is considered a fitting prelude to Egypt’s entry into the BRICS bloc, as part of a series of steps by the government to tackle the currency crisis, he said.
Edited translation of Al-Masry Al-Youm
