Cairo, 7 March 2024 (TDI): The Egyptian pound exhibited surprising stability on Thursday, March 7, following a revised agreement with the International Monetary Fund (IMF) of an expanded $8 billion program. Central Bank of Egypt allowed the pound to depreciate considerably.
The Egyptian Pound stayed early trade in the same range around 49.5 to the dollar it had settled at near closing on Wednesday, LSEG data showed.
Before Wednesday’s de-facto devaluation and a steep interest rate hike, the central bank held the currency for about a year at just under 31 pounds to the dollar.
While the devaluation initially sparked concerns about volatility, the pound remained relatively stable in the immediate aftermath.
However, experts caution that this stability might be temporary. The long-term impact of the devaluation on inflation and the overall economy remains uncertain.
“The stability witnessed today is a positive development,” stated Dr. Mahmoud Hassan, a prominent Egyptian economist. “While fluctuations are still expected in the transition to a flexible exchange rate, the IMF agreement provides much-needed support to ensure overall market stability,” he added.
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Egypt has promised such a move in the past, only to resume holding the currency at a fixed rate, while much of the economy depended on a black-market rate that fell as low as 70 pounds, which central bank governor Hassan Abdalla described on Wednesday as a “disease” that reflected a lack of trust in the financial system.
The pound’s devaluation and the agreement with the IMF come two weeks after Egypt signed an investment deal with Emirati sovereign fund ADQ that includes $24 billion payment for rights to develop a prime stretch of Mediterranean coastline.
While it is too early to predict the long-term impact, the initial stability of the pound is seen as a positive development. The coming weeks will be crucial to observe how market forces react to the new exchange rate system and the implementation of the IMF program.
