Evening star., 1949-07-31
Egypt Ponders
Money Middle
Economic Life Tied in
With Both Britain
and America
Bv Edword Pollok

! CAIRO.-Egyptlan currency 10
caught in a whip-saw between the
American dollar and the British
pound.
That dilemma also is faced by q
number of other countries whose
economic life is interviewer with
either or both countries. .
The top-most question Is
whether the pound will be de-
valued against the dollar. At the
moment there seems little doubt
that all efforts of the British are
being directed toward holding the
pound stable in terms OF dollars
at rate of about 81 to the pound.
But Egyptians are operating on
an IF, as and when" basis to be
prepared for any eventuality.
One of the big factors is that
Britain owes Egypt around
3e0, 900, 900 pounds (S1 S1.560,0o0,-
0O0), representing supplies and
services sold by Egypt to British
forces during World War II.
Negotiations between the two
governments in 1947. 1948 and
1949 led to agreements by which
Britain unfroze specified amounts
of sterling. Part was convertible
into dollars, part had to be used
in sterling area countries. But
the bulk of Britain's debt to
Egypt is still outstanding.
Needs Equipment, Goods
Sterling devaluation would
mean decrease in the purchasing
power of assets which Egypt ear
marked to pay for imports.
The National Bank of Egypt.
which issues Egyptian money, re-
Gently called the sterling balances
Egypt's first line OF defense
against an adverse trade balance"
Presently Egypt has an adverse
balance of 30,000,000 Egyptian
pounds ($124,800. .000). according
to official figures. These show that
imports from hard currency areas
like the United States chiefly &C
count 1Or CQe QellClG.
Consequently, banking circles
say, a sterling devaluation would
present Egypt with an alternative
|-devalue the Egyptian pound or
practically stop imports from
hard-currency countries.
The latter choice they deem i'm
possible. Egypt is in the midst. OF
industrial and agricultural devel-
opment. She must have equipment
and goods which Britain cannot
supply. These have to be imported
from the United States. Switzer-
land and other hard-currency
countries.
Secondly, sterling devaluation
undoubtedly would bring down
British treasury bonds. the biggest
security backing Egypt's bank
note issue. Latest official figures
show Egypt's banknote circulation.
at the end of last May, amounted
to 154,999,870 Egyptian pounds.
Possibilities Forecast
These were covered as 1olIoWS:
All per cent in gold.
1882 per cent in Egyptian state
bonds. -L
84.27 per cent in British treas
ury bonds.
Thus, bankers and traders con-
clude, any possible devaluation
would have deep repercussions on
Egypt's economy. AS result, the
situation of sterling balances ID
worrying them most.
A national bank report said:
These sterling assets are so
deeply embedded in the economic
structure Of the country that any
scaling-down of them " would
have the most serious repercus-
sions, not only on the exchange.
but also on the general economy
of Egypt"
4 Economists point out that for
Egypt sterling devaluation would
be- tantamount to scaling down
Of sterling balances, which the
Egyptian government persistently
opposed in past negotiations with
Britain.
distributed By the Associated PressJ
.