Standard Chartered headquarters in London. (Wikipedia).
The report represents a reversal of Standard Chartered's ominous predictions earlier this year that Egypt could conduct a devaluation of the pound to US Dollar = EGP 36 - to deal with shortages in hard currencies in the short term.
Still, the bank cautioned that the risk of a government decision to devalue the pound remains a possibility but is no longer the only forecast for the exchange rate before the end of 2024, according to sources familiar with the report.
The bank noted that reports that the government could adopt a pegging of the pound to a basket of currencies might give some flexibility to the exchange rate and limit fluctuations at the same time.
Since March of this year, the Egyptian pound has been exchanged against the US dollar in the official market between EGP 30 and EGP 31.
The USD/EGP exchange rate jumped from EGP 15.7 to EGP 18.56 after the start of a depreciation trajectory in March 2022.
It then climbed gradually to EGP 19.66, surging to EGP 23 toward the end of 2022, before settling at its current average of EGP 30-31 in March 2023.
On Monday, Fakhry El-Fiqi, the head of the planning committee in parliament, stated that the Central Bank of Egypt is expected to reach an agreement with the International Monetary Fund in early 2024 to peg the pound to a basket of international currencies and gold.
In October 2022, the CBE’s acting governor Hassan Abdalla announced that Egypt was working on setting an index for the pound that would be linked to a basket of gold and other currencies besides the US dollar.
Egypt is currently under review for the loan agreement with the IMF which requires Egypt to adopt a flexible exchange rate.
On Thursday, Jihad Azour, the director of the Middle East and Central Asia department at the IMF, stated that it is necessary and critical for Egypt to adopt a flexible regime for its exchange rate in order to protect its economy from the external shocks that are continuing to emerge.
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