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Egypt orders ministries to curb spending amid foreign currency crunch

January 10, 2023 at 5:03 pm

An Egyptian counts his money at the Ashmun market in Egypt on 15 August 2018 [MOHAMED EL-SHAHED/AFP/Getty Images]

Egypt’s government has instructed ministries to cut non-essential spending until the end of the fiscal year in June as it tries to cope with continuing pressure on its currency and rising inflation, Reuters reports.

The decision, dated 4 January and published in the official gazette this week, includes the postponement of any new national project heavily reliant on foreign currency and requires ministries to seek Finance Ministry approval on foreign currency expenditure.

The health, interior, foreign, and defence ministries are exempted, as well as agencies tasked with expenditure on subsidised food products and energy.

Some activities listed as non-essential spending include travel, marketing and conferences, as well as grants and training for employees. The decision included no detail on how much money could be saved.

READ: Egypt seeks first IMF loan installment this month

The move comes as Egypt has continued to face a foreign currency shortage despite allowing the Egyptian pound to depreciate sharply in recent months, most recently last week.

Egypt has spent heavily on large infrastructure projects in recent years. These include a new capital city east of Cairo and extensive road building, which helped sustain economic activity through the COVID-19 pandemic but have also faced criticism.

As Egypt came under financial pressure in early 2021, the Central Bank imposed curbs on import financing, causing a heavy backlog of goods at ports.

The reversal of the curbs was a key requirement of a 46-month financial support package from the International Monetary Fund confirmed in December. Greater exchange rate flexibility was another condition of the IMF deal.

READ: Egypt pound hits record low amid calls to fully liberalise exchange rate