Egyptian pound's losses against USD reach 100% since March

Doaa A.Moneim , Wednesday 11 Jan 2023

In a dramatic performance on Wednesday, the Egyptian pound hit its lowest-ever price of EGP 31 against the US dollar, losing over 100 percent of its value since March before slowing down to EGP 29.63 at the Central Bank of Egypt (CBE) and major banks.

US dollar
This file picture taken on August 25, 2022 shows Egyptian pound and US dollar banknotes. AFP


In Wednesday morning transactions, the US dollar traded for over EGP 31 at major banks, up from EGP 27.6 recorded a day earlier.

At the National Bank of Egypt, the US dollar price saw ups and downs before settling at EGP 29.75 for purchasing and EGP 29.8 for selling.

At the Commercial International Bank (CIB), the US dollar traded for EGP 29.65 for purchasing and EGP 29.75 for selling.

At HSBC and SAIB Bank, the US dollar price traded for EGP 29.6 for purchasing and EGP 29.7 for selling.

The euro prices also jumped by over EGP 1 to record over EGP 34 at major banks.

The unprecedented performance of the Egyptian pound on Wednesday came a day after the press conference the International Monetary Fund (IMF) held to announce the commitments Egypt has pledged under the new IMF-backed economic and structural reform programme.

In December, the IMF approved a $3 million loan for Egypt under the Extended Fund Facility (EFF) over four years.

Egypt received the first tranche of the loan in December and is expected to receive the second by the end of March after the completion of the loan’s first review. The total amount of the two tranches is $700 million.

Under the programme, Egypt has pledged to implement a flexible exchange rate.

“We had concerns about authorities’ commitment to a ‘durably’ flexible exchange rate regime, but January developments with the pound moving weaker against the USD point that they are moving in the right direction. The immediate EGP/USD outlook, however, is more challenging,” Standard and Poor’s (S&P) Global said in a note released on Wednesday.

S&P said that further EGP devaluation weakness will continue to exert upward pressure on the country’s inflation, which is projected to hit 25 percent in the first quarter of 2023 (by end-March) and to keep its acceleration throughout the year at an expected 17.5 to 18 percent.

That said, S&P expects the CBE to further hike the key interest rates by between 1 percent (100 bps) and 1.5 percent (150 bps) during the first quarter of 2023.

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