Egyptian pound falls by 17% vs dollar, 19% vs euro after adoption of 'flexible exchange-rate regime'

Ahmed Morsy , Thursday 27 Oct 2022

The Egyptian pound fell on Thursday during trading hours by 17 percent against the US dollar and 19 percent against the euro as the Central Bank of Egypt adopts a "flexible exchange-rate regime" as part of the new economic reform programme.



On Thursday afternoon, according to an average of exchange rates at various major banks in Egypt, the US dollar exchange rate registered EGP 22.9  up from EGP 19.7 on Wednesday and the euro exchange rate registered EGP 23.1 up and EGP 19.4 also yesterday.

The double-digit decline in the Egyptian pound started shortly after the Central Bank of Egypt (CBE) announced it was adopting a more flexible exchange-rate regime as one of a host of new monetary policies.

Among its decisions on Thursday, the CBE raised the key interest rates in an unscheduled meeting by two percent (200 bps) and said it would phase out LCs for import finance by December of this year.

Two days earlier, the Governor of the Central bank of Egypt Hassan Abdalla said the bank was working on setting an index for the Egyptian pound that will be linked to a basket of gold and other currencies besides the US dollar.

“Since Egypt is a non-oil exporter there was no need to peg its local currency to the US dollar,” Abdalla explained.

Also on Thursday, Egypt announced that it has agreed with the International Monetary Fund (IMF) on a new $3 billion loan.

Exchange rates

As the official website of the CBE went down on Thursday afternoon, Ahram Online surveyed the official websites of the major banks in Egypt for exchange rates.

At the National Bank of Egypt (NBE), the dollar rate registered EGP 22.8 for buying and EGP 22.9 for selling; the euro rate recorded EGP 22.9 for buying and EGP 23.1 for selling.

At Banque Misr, the dollar rate stood at EGP 22.9 for buying and EGP 23 for selling; the euro rate recorded EGP 22.9 for buying and EGP23.2 for selling.

At the Commercial International Bank (CIB), the dollar rate recorded EGP 22.9 for buying and EGP 23 for selling; the euro rate recorded EGP 22.9 for buying and EGP 23.2 for selling.

At the Arab African International Bank (AAIB), the dollar rate registered EGP 22.8 for buying and EGP 22.9 for selling; the euro rate recording EGP 22.9 for buying and EGP23.1 for selling.

According to the official exchange rate of the above mentioned banks, the Egyptian pound broke its previous records against the dollar when the dollar was traded at EGP 19.57 in September 2022 and at EGP 19.56 in December 2016.

Prior to Thursday’s new rates, and since the onset of the Russian-Ukrainian war on 24 February, the Egyptian pound had lost over 20 percent of its value against the US dollar.

On Sunday, Prime Minister Mostafa Madbouly affirmed that Egypt prioritises curbing inflation over the issue of exchange rate, stressing that the devaluation of the Egyptian pound does not mean that the economy is in a bad situation.

The government has recently intensified efforts to control elevated inflation, which has risen to a four-year high in September.

Including today's two percent hike, the CBE has raised key interest rates by five full points since February.

The central bank has also raised the Reserve Requirement (RR) ratio – which represents the percentage of total deposits a commercial bank is required to hold in reserve as deposits with central banks with no interest in return – to 18 percent, up from 14 percent, for the first time since October 2017 when it was raised from 10 percent.

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