A customer counts his U.S. dollar money in a bank in Cairo, Egypt March 10, 2016. E REUTERS/Amr Abdallah Dalsh/
CAIRO, Sept. 5 (Aswat Masriya) - Business activity in Egypt shrank for the 11th consecutive month in August on the back of further declines in output, new orders, and employment, a survey showed on Monday.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector recorded 47 points, after easing to 48.9 in July, remaining below the 50-point mark that separates growth from contraction.
"The August PMI figures underscore the urgency to initiate a wide-ranging economic reform program," said Jean-Paul Pigat, Senior Economist at Emirates NBD, according to Reuters.
Egypt, which has been struggling to revive its economy since a popular uprising in 2011, reached in August an initial agreement with the International Monetary Fund (IMF) on a three-year extended fund facility programme worth $12 billion.
The loan is designed to restore the confidence of foreign investors and ease a crippling dollar shortage hindering economic growth after subsequent political upheavals drove away investors and tourists.
Meanwhile, the parliament approved a value-added tax at a rate of 13 per cent, as part of the government’s economic reform programme that has been endorsed by the IMF.
The survey ascribed a rise in the purchasing prices and difficulties in obtaining raw materials to the weakening exchange rates from Egyptian pound to US dollar.
"The survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the EGP," said Pigat.
The Central Bank of Egypt devalued the pound by about 14 per cent to reach EGP 8.78 against the dollar in March in an effort to close the gap between the official and parallel rates but the move failed to boost dollar liquidity or close the gap. The pound currently changes hands at about 12.6 per dollar, while the banks kept the pound steady at 8.88.
According to the survey, unemployment dropped to its lowest rate since April 2011, with a number of employees reported to have chosen to leave their posts in order to search for better job opportunities.
The unemployment rate in Egypt dropped in the second quarter of 2015 to 12.7 percent, moving down from 12.8 percent in the first quarter, state statistics agency said last month.
Egypt's President Abdel Fattah al-Sisi said in 2015 that he targets a decrease in the unemployment rate to 10 per cent over the next five years.