2022 Yearender: The EGP's struggle against the US dollar since March

Doaa A.Moneim , Wednesday 28 Dec 2022

The Egyptian pound has lost over 25 percent of its value against the US dollar since March, when the Russia-Ukraine conflict started.

An employee counts money at an exchange office in downtown Cairo, Egypt. File/Reuters


From an average of EGP 17.74 recorded on 20 March, the Egyptian pound reached its lowest drop in value since 2016, reaching an average of EGP 24.75 per $1 on Wednesday.

Since March, Egypt has depreciated the Egyptian pound two times and hiked the interest rates by a total of 8 percent (800 bps), a record level in the country’s monetary policy history, while the local market warily anticipates a third depreciation following the IMF deal approval.

Here is a timeline of the Egyptian pound’s performance against the US dollar since March:

21 March: The Central Bank of Egypt (CBE) hiked interest rates by 1 percent (100 bps) for the first time in 2017, and devaluated the Egyptian pound by about 5 percent, as the US dollar traded at an average of an EGP 18.21, up from an average of an EGP 15.74 a day earlier.

From March to August: The US dollar continued to be traded at an average of EGP 18.

10 May: The Central Agency of Public Mobilisation and Statistics (CAPMAS) said that Egypt’s headline annual inflation rate accelerated to 14.9 percent in April, up from the 12.1 percent recorded in March and 4.4 percent in the corresponding month in 2021.

19 May: The CBE hiked the key interest rates, for the second time since the onset of the Ukrainian war, by 2 percent (200 bps).

In May, the US dollar price ranged between EGP 18.48 and EGP 18.6.

9 June: Egypt’s annual headline inflation kept elevating to record 15.3, CAPMAS announced.

During June, the US dollar traded at between EGP 18.62 and EGP 18.8.

7 July: For first time since March, Egypt’s headline monthly inflation declined to 13.2 percent in June, while the annual headline inflation accelerated to 14.7 percent in June, up from 5.3 percent in the corresponding month of 2021, according to CAPMAS.

In July, the US dollar rate traded at EGP 18.8 and EGP 18.92.

2 August: The US dollar further strengthened against the Egyptian pound, recording an average of EGP 19.

10 August: Egypt’s headline annual inflation accelerated 14.6 percent – more than double the corresponding month in 2021 – up from 13.2 percent in June, while urban annual inflation also rose to 13.6 percent, according to CAPMAS.

29 August: Minister of Finance Mohamed Maait revealed that $23 billion in indirect investments in local debt instruments had fled the Egyptian market since March.

During August, the US dollar traded at between EGP 18.97 and EGP 19.23.

8 September: Egypt’s annual inflation rate rose to 16.7 percent in August, according to the CBE.

During September, the US dollar trading price started to surpass the levels it registered in 2016, when Egypt adopted an IMF-backed economic reform programme with a loan of $12 billion.

Accordingly, the US dollar rates ranged between EGP 19.2 and EGP 19.5 throughout the month.

10 October: Egypt’s annual headline inflation rose to 15.3 percent in September, up from 8 percent in September 2021, reaching the highest level since recording 15.7 percent in November 2018, according to CAPMAS.

16 October: The IMF and the Egyptian authorities announced that they reached a staff-level agreement for a new loan programme for Egypt worth $3 billion.

23 October: The CBE announced that it is working on setting an index for the Egyptian pound that will be linked to gold and other currencies besides the US dollar.

27 October: The US dollar started to leave the EGP 19 zone, trading at above EGP 20.

Meanwhile, The CBE hiked the interest rates by 2 percent (200 bps) in a bid to curb the elevating inflation.

Dealing with the impact of the US dollar shortage on the import sector, the CBE announced in October it would begin a process of phasing out letters of credit (LCs) for import finance by December 2022. So far, there are no signs that the CBE will implement this decision.

It also raised the exception limit of the LCs for imported shipments from $5,000 to $500,000 starting 27 October.

In October, the US dollar rose to EGP 19.53 and then to EGP 24.17.

10 November: CAPMAS said that Egypt’s annual headline inflation maintained its upturn to record 16.2, a record level since November 2018.

In November, the US dollar price traded between EGP 24.18 and EGP 24.55.

9 December: Reaching a record level in almost five years, Egypt’s annual core inflation jumped to 21.5 percent in November 2022, up from 19 percent in October 2022, continuing its rise since March, according to CBE’s figures.

17 December: The IMF approved a $3 billion loan for Egypt under its extended fund facility, with measures to ensure a flexible exchange rate regime.

28 December: The US dollar continued to gain value against the Egyptian pound, reaching over EGP 24.75, relatively the same level recorded since beginning of the month.

Short link: