Egypt could depreciate EGP to close gap with rate in parallel market: Parliamentary committee head

Ahram Online , Monday 22 Jan 2024

Egypt may devalue the Egyptian pound to bridge the gap with its traded rate in the parallel market, said Fakhry El-Fiqi, head of the Planning and Budget Committee in the House of Representatives.

Fakhry El-Fiqi
Fakhry El-Fiqi, head of the Planning and Budget Committee in the House of Representatives.


"The move would be meant to encourage greenback holders to deposit their savings in banks when the parallel market rate converges with the official exchange rate,” El-Fiqi added.

Meanwhile, in the parallel market, the US dollar is traded for over EGP 60, while the official exchange rate remains at almost EGP 31 per dollar.

El-Fiqi emphasized that certain conditions must be met before any devaluation takes place, with the foremost requirement being a sustained decline in inflation rates.

"Inflation should fall below 25 percent within the next six months," El-Fiqi stated during a phone-in on TV.

In September, headline inflation peaked to 40.3 percent before gradually declining to 35.2 percent in December.

Among the prerequisites for devaluation, the Central Bank of Egypt should adopt a tighter monetary policy and absorb the EGP 500 billion liquidity following the maturity of the certificates of deposit issued by the National Bank of Egypt (NBE) and Banque Misr in January 2023, he added.

El-Fiqi underscored the importance of ensuring an adequate supply of foreign exchange, estimated at $5 billion for banks to facilitate documentary credits for importers, thereby discouraging reliance on the parallel market.

He mentioned the potential role of the International Monetary Fund (IMF) in providing the required funds through its ongoing $3 billion loan programme for Egypt.

In 2022, the IMF approved a 46-month loan programme for Egypt. However, the programme has been temporarily suspended, and the first and second reviews scheduled for March and September 2023 were postponed due to Egypt's slowdown in meeting the IMF conditions.

Currently, an IMF mission is in Egypt for discussions on the first and second reviews of Egypt’s reform programme in light of the country's economic crisis and prevailing geopolitical tensions.

El-Fiqi also predicted that the IMF may augment its financial support, stating, "the precise amount of the increase is uncertain, but there are indications that the loan could reach $6 billion or exceed this figure."

On Saturday, cabinet spokesperson Mohamed El-Homosany said that claims about a possible devaluation of the EGP against the dollar, coinciding with the visit of the IMF mission, were mere speculation.


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