The Egyptian government is likely to devaluate the pound against the US dollar for a fourth time later this month amid an economic crisis that is hitting lower and middle-class households ahead of the holy Muslim month of Ramadan.
“Even though the Central Bank of Egypt (CBE) has imposed three devaluations before the dollar, making the local currency almost 50 per cent weaker over the past year, it has not yet reached the short-term balance required by the International Monetary Fund (IMF) that had entered into a loan agreement in 2020,” financial analyst Salah Zaki told The New Arab.
In October 2022, the CBE imposed an exchange rate flexibility, allowing the value of the Egyptian pound to be regulated by market forces in a bid to save an already ailing economy after securing a $3 billion loan from the IMF.
According to emerging markets strategists at Societe Generale Phoenix Kalen and Gergely Ürmössy, the ailing Egyptian economy will need a cheaper currency given its large current account deficit and dollar shortage.
Egyptians can no longer acquire dollars from banks or currency exchange offices. Anybody travelling abroad is entitled to not more than $5000 in the official currency exchange markets, although in the informal market where the pound is even more devalued, it's a different story.
The US dollar jumped to about 30.77 EGP at the time of publishing.
Zaki predicted that “the dollar, already valued at about 32.5 pounds in the informal market, to reach 35 pounds by then.”
Egypt is a country that depends heavily on imports at a time when people's income is linked to a devalued currency, leading prices of basic commodities to experience unprecedented hikes.
In January last year, Egypt's annual urban inflation rate climbed for the seventh straight month to 25.8 per cent in January this year, compared to 21.3 one month earlier.
The crisis has forced the government to look for new sources of foreign currency, including touting the sale of state assets to wealthy Gulf nations.