Egypt orders government to limit spending amid foreign currency crunch

Egypt's government has instructed its ministries to cut back on non-essential spending until the end of the fiscal year in June in an attempt to cope with continuing pressure on its currency and rising inflation.

As Reuters reported, the order was given on January 4 but published in the official gazette this week. Additionally, any new national project heavily reliant on foreign currency has been postponed, and requires ministries to seek finance ministry approval on foreign currency expenditure.

An exemption has been issued for the health, interior, foreign, and defence ministries, as well as agencies tasked with expenditure on subsidized food products and energy.

Non-essential spending includes activities such as travel, marketing, and conferences, as well as grants and training for employees. 

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

The move comes as Egypt’s external economic vulnerability risk has increased amid non-resident capital having been pulled out of the country, triggered by the Russian invasion of Ukraine, according to the Financial Times.

The capital outflow triggered the foreign currency crisis and forced Cairo to borrow over $13 billion from Arab Gulf states and appeal to the International Monetary Fund for the fourth time since 2016.

The publication recalls, that Egypt’s central bank raised interest rates last year in an attempt to attract foreign portfolio inflows and finance the country’s account deficit, but those measures did not relieve the pressure on the currency.