Tarek Amer: Resignation does not resolve significant failures

Wednesday, Abdel Fattah Al-Sisi accepted a surprising resignation presented by the governor of the Central Bank of Egypt, Tarek Amer, who is popularly seen as the main responsible for the collapse of the Egyptian pound that doubled the severity of living conditions in the country over the past few years, and during the past few months particularly. The declared reason for Amer’s resignation is his desire to give space to “inject new blood and complete the successful development process under the leadership of the president of the republic.” However, many indications confirm that Sisi forced Amer to resign to allow an expected significant change in the monetary policies under the pressures of the International Monetary Fund.

Disguised dismissal

Parallel to the cabinet reshuffle at the beginning of this week said that Amer had submitted his resignation, but CBE quickly denied it. Gamal Negm, the first deputy governor of CBE, described the news as “fabricated rumours” to negatively affect CBE and Egypt’s banking system. According to Negm, rumours were motivated by “the purposes, interests and ambitions of those behind the scenes.” Rumours were released while the country suffered a vulnerable economic status, a significant decline in the pound’s value against the dollar, rising inflation, a large trade balance deficit, an unprecedented hike in foreign debt, and continuous depletion of foreign exchange reserves.

The government is in tense negotiations with the IMF to obtain a new loan to alleviate the economic crisis. Indeed, CBE is supposed to play a decisive role in forming the agreement. The resignation also came one day before an important meeting of the CBE. Although kept the interest rate without rising in this meeting, the meeting was decisive in drawing the shape of the upcoming days. Accordingly, the change was not primarily smooth as the CBE, and the presidency attempted to display it. Sources told Egypt Watch Sisi decided to remove Amer, but the dismissal was presented as resignation because the constitution immunises the central bank governor from dismissal.

Why was Amer overthrown?

Economic expert Mohamed Hashem believes Amer’s ouster is linked to the IMF’s criticism of the monetary policies in Egypt in a statement issued by the fund last July. Unequivocally, the removal of Amer aims at releasing more flexible approaches in terms of the exchange rate in particular. Amer was leading an Egyptian bureaucratic wing refusing the full acceptance of the IMF demands to deepen the exchange rate liberalisation, which could put the dollar price in Egypt at 25 pounds. Meanwhile, the finance minister, Mohamed Mait, adopts the option of full liberalisation, expecting the dollar price to remain under 20 pounds. Keeping Mait in the office within the latest cabinet reshuffle indicated his view won the mind of Sisi personally, so it was necessary to sacrifice Amer.

Banking sources attributed the overthrow of Amer to his differences with the private sector and business people due to the restrictions imposed by the Central Bank on imports from abroad due to the foreign exchange crisis. The most prominent of these restrictions is the suspension of collection documents upon the importance and limitation of bank documentary credits. Documentary credits obligate importers to pay the entire shipment value upon contracting, unlike what they are accustomed to by paying only a part at the beginning and completing the payment after selling the goods. The decision faced strong objections from the Federation of Industries, the Association of Businessmen and the General Federation of Chambers of Commerce due to its negative repercussions on the aggravation of the supply chain crisis caused by the Corona pandemic and the industry’s supply of intermediate goods, which will result in increases in commodity prices locally.

Al-Sisi personally intervened in the crisis last May and issued a directive excluding production requirements and raw materials from the procedures implemented by returning to the old system through collection documents. However, this directive remained words in the air, as there are still great difficulties in managing hard currency, as most banks provide it for strategic commodities only, on complex terms, and after at least two weeks., as most banks offer them for strategic items only, on difficult times, and after no less than two weeks. Although import restrictions are not expected to be lifted soon, Amer’s ouster is a relief to the business community, suffering severely since the beginning of this year.