What happened to the Egyptian pound?

The Egyptian pound has been floated, and today’s bank rate for the dollar is 13 EGP, following the Central Bank’s decision to liberalize the exchange rate1. In the black market, it has reached 13.75 EGP1. This comes after a period when the dollar had reached 18.25 EGP in just one week1. The current official rate under President Sisi is three times what it was under Mubarak and twice what it was under Morsi1, despite previous promises of its decline below ten pounds.

There have been no significant foreign investments or loans entering the country recently1. The government’s dollar reserves are at their lowest, and the black market has been supplying dollars to investors and traders, causing prices to soar1.

After an urgent meeting on October 22, which included President Sisi, the Governor of the Central Bank, and several ministers, no new decisions were announced, and the dollar rate remained at 8.88 EGP in banks2. However, there was speculation about secret decisions being made2.

Subsequently, a new entity called the “Supreme Council for Investment,” chaired by President Sisi himself, announced a package of decisions to support Egyptian and foreign investment by reducing taxes and providing broader opportunities3. Yet, the public announcements may not reflect the full story3.

Following these meetings, a series of events led to the dramatic changes in the dollar’s rate we saw yesterday1. These include:

Prime Minister Sherif Ismail’s announcement that the dollar’s bank rate would soon match the black market rate due to reforms with the Central Bank4.

The Central Bank’s decision to stop accepting dollar deposits of unknown origin.

The Federation of Chambers of Commerce imposing restrictions on importers and major traders from dealing in dollars.

A media campaign suggesting a significant drop in the dollar’s rate.

Social media hashtags and discussions influencing public perception of the dollar’s rate.

The Central Bank’s decision to float the pound partially in banks, leading to a higher exchange rate for the dollar in banks compared to the black market1.

Ultimately, these actions were taken to make the public believe that the dollar’s rate had decreased from 18 to 13 EGP in six hours, overshadowing the fact that it was originally at 7 EGP1. After the floatation, a significant increase in prices is expected due to the heavy reliance on imported food items, which will likely rise by 48%1. Without foreign investments, serious exports, and national projects generating hard currency, the pound may fall further, potentially leading to hyperinflation similar to Zimbabwe and Sudan1.