Dollar and Egyptian Pound (iStock)
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As part of the implementation of the requests of the international financial institutions
Cairo – Khaled Hosni
Published on: January 4, 2024: 12.36pm GST Last updated: January 4, 2024: 4.44pm GST
So far, the Egyptian government has not issued any official statements or statements regarding the planned listing of the Egyptian pound, although markets are anticipating a sudden movement in the context of the implementation of requests from international financial institutions, especially the International Monetary Fund, on need to accelerate the liberalization of the foreign exchange market.
Experts and analysts differ regarding the importance and feasibility of a devaluation of the Egyptian pound against the dollar. But the violent crisis linked to the scarcity of the dollar has pushed the Egyptian government to look for sources to fill the financial gap, which some institutions estimate at between 7 and 11 billion dollars.
In light of the presence of external bonds maturing in the current year amounting to approximately 42.3 billion dollars, the listing remains one of the mechanisms for attracting foreign investments and reassuring institutions and investors.
Non-oil business activities in Egypt contracted in December
Available data indicates that Egypt has carried out 6 major devaluations of the Egyptian pound. The beginning dates back to 1977, when President Mohamed Anwar Sadat authorized the return of import cards to the private sector, and the era of loans from the West began, which then transformed into the so-called Paris Club debts, but with l Sadat’s inability to liberalize the general budget in 1977, the lack of a continuous flow of investment in the Gulf and economic weakness. The year the dollar crisis occurred again, and the dollar officially went from 1.25 pounds at about 2.5 pounds.
The second fluctuation occurred in 2003, after the government decided to free up supply and demand transactions in the market by fixing the exchange rate of the pound and decoupling it from the dollar. The price of the dollar rose to 5.50 pounds after the float decision. , and continued to rise to settle at the £6.20 level.
On November 3, 2016, the Central Bank of Egypt announced the liberalization of the pound exchange rate and prices according to supply and demand mechanisms, as well as the freedom for banks to operate foreign exchange through the dollar interbank mechanism, bringing the dollar when purchased at the highest price priced at 14.50 and the lowest price at 13.5 pounds.
During 2022, Egypt announced the devaluation of its currency 3 times, which caused the Egyptian pound to decline against the dollar by approximately 25% from 2023 to date and by more than 69% from March 2022.
Although since the beginning of January last year the dollar rate on the official market has remained stable at the level of 30.85 pounds, violent movements have occurred on the parallel foreign exchange market which in some periods have caused the dollar rate to jump up to a level greater than 55. lbs. However, according to traders, the dollar is currently trading on the black market at levels above 52.50 pounds.
Flexible changing system
A few days ago, Moody’s Analytics predicted a new devaluation of the Egyptian pound as the government moves towards gradually implementing a flexible exchange rate system, which will bring average inflation above 24% next year and interest rates high.
Foundation analysts said Egypt’s economic problems stem from long-standing structural challenges such as food insecurity, sharp population growth, and financial and external imbalances.
He stressed that both budget and current account deficits have caused the growth of public and external debt. Despite the stability of the dollar exchange rate in the Egyptian official market, a recent report suggests that the dollar exchange rate will reach the 45 pound level in the first quarter of 2024.
While HSBC Bank estimates indicate a reduction in the Egyptian pound exchange rate to a level of between 40 and 45 pounds per dollar during the first quarter of 2024, compared to its previous expectations of between 35 and 40 pounds.
He pointed out in a recent report that the pound’s exchange rate in Egypt has been stable for months in official transactions at 30.9 pounds per dollar, having devalued the currency three times since March 2022, while its price on the black market has recorded a level of 50 pounds per dollar.
He stressed that the adjustment of the Egyptian pound exchange rate is part of the move towards a more flexible exchange rate system and facilitates the completion of the first review of the reform program supported by the International Monetary Fund.
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2024-01-04 12:44:29
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