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CAIRO: Egypt’s president on Thursday appointed a caretaker governor of the central bank, the president’s office said, a day after the bank’s chief resigned amid a grinding economic crisis triggered by Russia’s war on Ukraine.

According to a statement, President Abdel Fattah El-Sisi named Hassan Abdalla to succeed Tarek Amer, who had held the post since 2015. The appointment still needs to be ratified by the state-controlled parliament, which is in recess until October.

In a meeting with the new appointee, El-Sisi stressed the importance of upgrading the country’s monetary policies to cope with global economic changes and to diversify Egypt’s sources of foreign currency, the statement also said.

Abdalla, 62, had worked as a banker for almost four decades in Egypt until he became the CEO of the Arab African International Bank in 2004. In May 2021, he was appointed the chairman of United Media Services, a state-controlled media conglomerate.

On Wednesday, El-Sisi accepted Amer’s resignation and named the outgoing governor a presidential adviser. The president’s office offered no explanation for Amer’s resignation. 

Amer had traditionally been seen as in the camp that supported the pound’s depreciation as a way to secure a new loan from the International Monetary Fund in order to address the growing budget deficit.

His resignation came after key ministries were reshuffled on Saturday, a Cabinet shake-up approved by parliament in an emergency session. A total of 13 ministries were affected, including health, education, culture, local development and irrigation. The country’s minister of tourism and antiquities also was replaced.

Analysts said the CBE may have been conservative after the change of governor, even as Egypt’s economy grew faster than expected in the 2021/22 fiscal year and inflation surged. 

The CBE’s Monetary Policy Committee (MPC) said it left its lending rate unchanged at 12.25 percent and its deposit rate at 11.25 percent.

“The MPC decided that keeping policy rates unchanged remains consistent with achieving price stability over the medium term,” it said in a statement accompanying the rates decision.

A Reuters poll of 15 analysts taken prior to Amer’s resignation had expected a half a percentage point increase.

“In its decision to maintain policy rates unchanged today, the MPC takes note of its policy rate hikes in its previous meetings,” the MPC added.

The Egyptian currency has slid to more than 19 Egyptian pounds to the dollar. That followed a central bank decision allowing the currency to depreciate by around 16 percent in March to try to stem a growing trade deficit.

Russia’s war in Ukraine has been deeply felt in other ways in Egypt. The Arab world’s most populous country is also the world’s largest wheat importer that sources around 80 percent of it from the Black Sea region.

Following Russia’s invasion in late February, the price of wheat and other grains skyrocketed, as did the price of fuel. Although prices have come down somewhat, the cost of grains remains at least 50 percent higher than before the pandemic in early 2020. Furthermore, the cost of shipping to export those grains through the Black Sea is high.

Inflation in the country of 103 million people reached 14.6 percent in July, increasing pressure on lower-income households and everyday necessities. Around a third of Egyptians live in poverty, according to government figures.

The central bank raised rates by 2 percentage points in May and 1 percentage point in March to combat inflation after Russia’s invasion of Ukraine and US interest rate hikes.

“The committee likely wants to proceed cautiously during the transition period,” said Sara Saada of CI Capital.

Egypt’s gross domestic product grew by 6.2 percent in the fiscal year that ended on June 30, up from 3.3 percent a year earlier.

This was mainly driven by the private sector, particularly non-petroleum manufacturing, tourism, and trade, the MPC said, citing data from the first nine months of the fiscal year.

Inflation rose to 13.6 percent in July from 13.2 percent in June, its fastest since in March 2019.

At its last meeting on June 23, the MPC said that for the next six months it would tolerate elevated inflation, caused mainly by the Ukraine crisis, as the economy grows more slowly than expected.

“We expect no changes in the policy rates until the new CBE leadership settles in and takes stock of the situation,” said Allen Sandeep of Naeem Brokerage.

Esraa Ahmed of Pharos said she believed the MPC left rates unchanged for fundamental reasons, including a gradual decrease in global commodity prices and less pressure on the budget.

“We had that view even before the change in governor,” she said. 

Meanwhile, an investigation by the country’s public prosecutor said in a statement Thursday that a fire in a Cairo church last Sunday that killed 41 people, including 15 children, was the result of a short circuit in the building’s generator, a backup source of power.

The tragedy at the Martyr Abu Sefein church in the working-class neighborhood of Imbaba threw the country into mourning but also raised questions about emergency response, fire safety codes and restrictions on building houses of worship for the country’s Christian minority.

(With AP and Reuters)