EGP Falls Past 19 per Dollar for 1st Time in Over 5 Years

04/08/2022

The Egyptian pound (EGP) weakened on Wednesday past the 19 threshold against the US dollar for the first time in more than five years, reaching 19.048, the Central Bank of Egypt's (CBE) data showed.

The last time the pound traded this low against the greenback was on December 21, 2016, when it stood at 19.061, after Egypt embarked on a three-year $12 billion loan program with the International Monetary Fund (IMF), which was coupled with currency floatation.

In the wake of the Russo-Ukrainian war, the CBE devalued the pound by 16 percent on March 21, leaving it at 18.171.

The move came to reflect the impact of the economic shock triggered by the war and to help alleviate the pressure on the country's foreign exchange reserves.

In addition, analysts saw the devaluation, which aims to reflect the fair value of the currency, as paving the way for the loan program Egypt is currently negotiating with the IMF.

Alia Mamdouh, director of macro and strategy at Beltone Financial, expected the pound to reach 20 against the dollar by October 2022.

"The way it's been moving since March is more of a slight movement, as though [the CBE is] sending the IMF a message that they don't keep the rates at a certain level," Mamdouh told The Africa Report earlier this week.

She also expected the fund to keep pushing for a more flexible exchange rate in Egypt, a view echoed by Carla Slim, MENA economist at Standard Chartered, in a Bloomberg interview.

Last month, the IMF said that despite succeeding to achieve the objectives of the 2020 stand-by arrangement (SBA), "decisive progress on deeper fiscal and structural reforms is needed to boost the economy's competitiveness, improve governance and strengthen its resilience against shocks."

In a survey published by Asharq Business, after the IMF's statement, Head of Research at NAEEM Brokerage Allen Sandeep expected the pound to hit 19.5 by the end of the year, while Deputy Research Manager at Zilla Capital Aya Zoheir expected it to hit 20.5.

Egypt secured the one-year $5.2 billion SBA in June 2020.

The IMF announced in March that Egypt had requested support to implement a comprehensive economic program, but the size of the new financial package was not disclosed.