Egypt pound stable at central bank sale but falls on black market

Reuters , Tuesday 19 Apr 2016

Egypt's pound was stable at Tuesday's weekly foreign currency sale, but extended declines on the black market to a record low of around 11 to the dollar as the import-dependent country struggles with a foreign exchange shortage.

Egypt's central bank sold $120 million at its regular rate of 8.78 to the dollar at Tuesday's sale, but the widening gap with the black market rate is increasing pressure on the central bank to devalue for the second time in as many months.

Egypt has been facing a dollar shortage since the 2011 uprising drove away tourists and foreign investors, major sources of hard currency, putting pressure on the pound.

In an attempt to close the gap between official and black market rates, the central bank devalued to 8.85 per dollar from 7.7301 last month, while announcing a more flexible exchange rate policy. It later strengthened the pound to 8.78 per dollar, where it has remained since.

However, it is not yet clear what the new flexible policy will bring and the gap between the official and black market rates has widened once more.

Two black market traders said they were selling sought-after dollars on Tuesday for around 11 pounds, a steep decline from a range of 10.50 to 10.65 quoted on Monday.

The central bank has sought to crack down on black market trading, meeting with bureaus to push them to sell closer to the official rate and revoking some licences over the issue.

Egypt's public prosecution is investigating about 15 bureaus accused by the central bank of hoarding dollars, judicial sources have said. 

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