Since Ramadan, Egyptian markets have been going through a strange crisis, which is affecting trade and shedding more light on the current inflation.
Although the Central Bank of Egypt (CBE) stresses that there are now coins and small banknotes worth L.E. 989 million (US $111) in circulation, Egyptians are suffering from a lack of change, which refers to a problem of unavailable liquidity.
Since Ramadan, Egyptian markets have been going through a strange crisis, which is affecting trade and shedding more light on the current inflation.
Although the Central Bank of Egypt (CBE) stresses that there are now coins and small banknotes worth L.E. 989 million (US $111) in circulation, Egyptians are suffering from a lack of change, which refers to a problem of unavailable liquidity.
The crisis comes hand in hand with soaring prices and a devaluated pound where every L.E. 8.87 now equals one US dollar, according to the CBE, which allows for small increases during exchange. The exchange rate of the pound reaches L.E. 8.88 in banks and can increase by up to 15 piaster in private exchange offices and to as high as 11.70 in black markets.
The problem persists despite CBE chief Tareq Amer following protective monetary policies for three years, as did his predecessor Hisham Ramez.
The absence of the dollar is a serious indication of a declined economy and the lack of change hampers simple daily transactions, not to mention banning the imports of some goods to prevent the dollar from going abroad. The change crisis is revealing hidden anger about the economy and skyrocketing prices.
Change
Egyptians have been suffering the change crisis for several months now. In one grocery store in 6th of October City, the owner became selective about who would receive goods. Whenever a potential customer entered, the owner asked the customer whether or not he/she had change – if not, the owner would not sell anything.
“It is not my job to get you change,” shouted a Syrian customer who could not bear the vendor’s anger because of a lack of change.
Who will waive some coins?
In a branch of an upscale café chain, a worker complained of the lack of change, saying that the issue had been going on for months, especially during Ramadan and Lesser Bairam, due to increased purchases.
The crisis pushed Egyptians to stand in queues in shops to get change after buying their purchases. One of those in a queue said coins disappeared because some were collecting them then selling them with profits. Some store owners buy coins at a price 10 percent higher than what they are worth, while others get change from beggars.
Gas stations are also affected, though to a lesser extent because workers are keen on digging for change. Although gas stations have always been a source for coins, the fast food shops within them have been hit by the crisis. Previously, some café chains established branches within gas stations. One of their workers says re-minting paper money worth a pound, half a pound or quarter a pound has not solved the problem.
Money of the past
People have started exchanging paper money dating back to 2002 and 2003 when Mahmoud Aboul Enein was CBE chief. These banknotes were banned until very recently. Some of them have the signature of Farouk Oqdah who was CBE chief for ten years until he resigned in 2013. Then modern banknotes signed by Amer were introduced. In 2007, small banknotes were turned into coins.
Monetizing coins is a task of the Ministry of Finance Mint Authority (MA). These coins require importing raw materials for hard currency. The last monetization process was in August 2015 when the MA minted 15 million one-pound coins and five million half-pound coins that carried the Suez Canal slogan.
In the coming period, Egypt seeks to import metal disks to coin 200 million one-pound coins, 100 million half-a-pound coins and 100 million quarter-a-pound coins.
