Egyptian solar-power developers are increasingly concerned by the state’s declining foreign currency reserves, Bloomberg reports.
In an interview, Cairo Solar Chairman Hisham Tawfik says that repaying the company’s $51m loan from the International Finance Corporation may be difficult, as the payment guarantees from the Egyptian government for electricity produced will be in Egyptian pounds – which, despite a recent uptick, has been declining in value to the dollar and for which the government is restricting transactions into foreign currencies.
As the Egyptian government’s foreign reserves have declined by half since 2010 – a result of a loss of tourism and investment after the revolution – the state has implemented restrictions which make conversion of pounds more difficult: “How can I be happy if I have a lot of Egyptian pounds in the bank and I can’t change them to dollars,” Tawfik said.
Government repayment in pounds instead of dollars may undermine the country’s energy expansion goals. Egyptian Central Bank rules prohibit banks from lending dollars to projects which will receive payments in Egyptian pounds. As the Egyptian government insists on paying in pounds, financing for energy projects in Egypt which require international purchases becomes more difficult.
Combined with problems acquiring international financing, Egypt’s goals for boosting renewable energy’s place in its energy mix have been reduced from 20% to 12%.