Egyptian pound weakens to record low of around 50 against US dollar
The Egyptian pound weakened on Wednesday to a record low, falling to around 50 against the US dollar, LSEG data showed.
Earlier on Wednesday, Egypt’s central bank announced it will allow the exchange rate to be set by the market, causing the pound to lose more than a third of its value within minutes.
Shortly after 12:00 p.m. (1000 GMT), the Egyptian pound was trading at a record high of 49.15 pounds to the US dollar, after more than a year of a stabilized official exchange rate of around 30.9.
At a surprise monetary policy meeting Wednesday, the central bank committed to “allowing the exchange rate to be determined by market forces,” saying in a statement that “the unification of the exchange rate is crucial.”
Amid dire foreign currency shortages, the parallel market rate had surged to 70 pounds to the dollar earlier this year, sending consumer prices soaring in the import-dependent country.
Since the most recent economic crisis began in early 2022, Egypt has been buckling under rampant inflation, which reached a record high of nearly 40 percent last August.
In an attempt to rein in inflation, the central bank also raised its key deposit rate by six points on Wednesday, to a record high of 27.25 percent.
The central bank described the move as an attempt to “accelerate the monetary tightening process in order to fast-track the disinflation path and ensure a decline in underlying inflation.”
Egypt has been in talks with the International Monetary Fund over increasing the value of a $3 billion loan facility already agreed with the lender.
A fully flexible exchange rate and tighter monetary policy were among the conditions attached by the IMF and loan tranches had been repeatedly delayed until the reforms go ahead.
Prior to Wednesday’s announcements, Egypt had already devalued its currency three times in recent years. But it had held back from fully floating the pound, citing concerns for the impact on Egyptians, two-thirds of whom live below or right on the poverty line.
Egypt is drawing up plans to develop Ras Gamila, a stretch of largely vacant seaside near the resort of Sharm el-Sheikh, a government official said, days after a huge Emirati investment deal was announced.
“A committee was formed following a cabinet decision to research, present and prepare a strategic vision for exploiting the area,” Mansour Abdel Ghany, spokesperson for the Ministry of Public Enterprise, said on an Egyptian talk show on Monday evening.
“Not only making use of Ras Gamila, but also the surrounding area, the geographic space and neighboring areas,” he added.
Egypt may engage a consultant to help decide on how best to maximize the benefit from the land, he said, but added that the government had not yet decided who to offer it to.
Egypt, badly in need of foreign currency, facing heavy foreign debts and suffering a gaping budget deficit, has stepped up plans to sell state assets.
Last week, Abu Dhabi’s sovereign wealth fund agreed to pay $24 billion for the rights to develop pristine land on Egypt’s northern coast, which Egypt called the biggest foreign direct investment in its history.
The deal, which includes an additional $11b in investments, is expected to provide a big short-term boost for Egypt’s faltering economy.