Egypt: a severe economic crisis overwhelming the country and Egyptian pound is crumbling
The Egyptians are following the historical declines witnessed in their economy on daily basis, and the Egyptian pound started to decline sharply.
The Egyptian currency faced a drop down against the US dollar, with concern and anticipation, as the Egyptian pound reached record lows only 10 days into 2023, after the pound ended 2022 with a decrease of about 60%.
The value of the Egyptian pound declined rapidly to exceed 32 pounds per US dollar on Wednesday, before cutting its losses and closing at 29.74 pounds per US dollar, according to the average price in banks, according to the website of the Central Bank of Egypt.
On the other hand, the value of the Egyptian pound at the black market price was 36 pounds per US dollar.
The Egyptian pound’s decline has fueled speculation about how far the Egyptian currency may eventually fall, with at least some analysts hoping some foreign investors will return to the Egyptian market and Egyptians working abroad will send more of their savings home.
Banking experts expect that Egypt will continue to adhere to the flexible exchange rate of currencies against the pound during the coming period, especially as it pledged to the IMF to switch to a permanently flexible exchange rate, when it reached an agreement with the fund on a financial support package worth three billion US dollars last October.
The International Monetary Fund released the letter of intent that the Egyptian government addressed to fund officials on November 30, 2022, which revealed several matters that the Egyptian economy will follow to control inflation rates and face difficult economic challenges.
The Egyptian government pledged not to interfere in foreign currency markets to achieve stability or to guarantee an exchange rate, except in cases of extreme volatility.
The Egyptian pound government also pledged to slow down the pace of investment in public projects to curb inflation and preserve the foreign currency.
The Egyptian government proved this by issuing a decision that included postponing the implementation of any new projects that have not started and have a clear dollar component.
The recent agreement between the Egyptian central bank’s with International Monetary Fund officials confirms the need for a flexible exchange rate, while giving the central bank the right to intervene so that fluctuations don’t occur, and therefore it is normal to reach the parallel market price, otherwise the discrepancy in the value of the dollar will remain.
There are expectations for a rise in the exchange rate of the US dollar against the Egyptian pound, as well as the value it has reached recently and more, in light of the implementation of the full plan developed by the Monetary Fund to get out of the structural problems in the Egyptian economy.
However, economic analysts indicated that it’s difficult to predict the value of the US dollar in Egypt in the upcoming period.
The importance of a flexible exchange rate, given the existence of agreements on a group of companies, a large part of whose shares will be acquired on the stock exchange, so the current US dollar exchange rate is encouraging for companies that have been announced to offer part of their shares on the stock exchange to start moving.
In the opposite direction, some analysts say that one of the main indicators that must be looked for to explore the course of the exchange rate in the coming period is the extent to which investors and families resort to using the dollar to buy the Egyptian pound at its current low rates, indicating that they believe that the Egyptian currency’s decline may have reached to the maximum extent.
