US dollar reaches EGP 72 in Egypt's parallel market

Asmaa Mostafa , Wednesday 31 Jan 2024

The US dollar rate in Egypt’s currency parallel market has soared to a new peak, hitting EGP 72 per USD, multiple sources in the local market reported to Ahram Online.

File Photo: shows Egyptian pound and US dollar banknotes. AFP
File Photo: shows Egyptian pound and US dollar banknotes. AFP


This unprecedented level represents a 132 percent increase compared to the official exchange rate, which currently stands at almost EGP 31 per USD, amid the severe dollar shortage crisis that Egypt is currently grappling with.

The surge in the US dollar rate in the parallel market comes amid widespread anticipation that Egypt may implement a fourth wave of currency devaluation against the US dollar.

S&P Global Ratings agency has recently released a report predicting Egypt to devalue its currency to align more closely with the parallel market rate of EGP 72/$1.

The government may devalue the Egyptian pound to narrow the gap with the parallel market rate, Fakhry El-Fiqi, head of the Planning and Budget Committee in the House of Representatives, stated last week.

However, British bank HSBC has offered a more conservative forecast, expecting the government to devalue the Egyptian pound for the fourth time to reach a rate of only EGP 40-45 per USD during the first quarter of 2024.

Furthermore, the Egyptian cabinet's Information and Decision Support Centre (IDSC) has recently emphasized that the country aims to adjust the value of the Egyptian pound against the USD to reach a target rate of 39.61 by 2028.

Since 2022, Egypt has devalued its currency three times, leading to a depreciation of around 70 percent against the USD.

The US dollar shortage crisis in Egypt emerged initially with the outbreak of the Russia-Ukraine war, which resulted in an outflow of over $22 billion from the country.

Amid this challenging foreign currency crunch, importers in Egypt are pricing commodities in the local market at EGP 85 per USD.

The anticipated fourth devaluation is intended to enhance exchange rate flexibility, as part of Egypt's commitments under its $3 billion loan programme with the International Monetary Fund (IMF).

Egypt has encountered difficulties in meeting its commitments to adopt a flexible exchange rate and interest rate regime, expedite the IPO process, and bolster the private sector’s role in the economy, resulting in missed IMF reviews.

In January, an IMF mission arrived in Egypt to discuss additional financing in light of the severe economic implications of the Israeli war on Gaza.

Egypt's real GDP growth is expected to rebound reaching 4.7 percent in the upcoming FY2024/2025, supported by the IMF’s financing and policy package, Daniel Leigh, a division chief at the IMF's Research Department, told Ahram Online on Tuesday.

The Central Bank of Egypt's (CBE) Monetary Policy Committee (MPC) is scheduled to convene on Thursday to review the key interest rates, with expectations varying as to whether the current rates will be maintained or increased.

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