The US dollar saw a notable rise against the Egyptian pound at the close of trading on Wednesday in most banks operating in Egypt. This move comes within the context of the flexible exchange rate system adopted by the Central Bank of Egypt, which allows supply and demand forces to determine the value of the local currency, reflecting the true economic situation and attracting foreign investment.
Dollar exchange rates in major Egyptian banks
According to the latest updates, the dollar was trading at approximately 47.89 Egyptian pounds for buying and 48.02 pounds for selling at the Central Bank of Egypt. At the two largest state-owned banks, the National Bank of Egypt and Banque Misr, the exchange rate reached 47.88 pounds for buying and 47.98 pounds for selling. Other banks offered similar rates, with the Commercial International Bank (CIB), Faisal Islamic Bank, and Suez Canal Bank all at 47.88 pounds for buying and 47.98 pounds for selling, while Bank of Alexandria offered 47.85 pounds for buying and 47.95 pounds for selling.
The economic context of exchange rate fluctuations
These fluctuations stem from the Central Bank of Egypt's decision on March 6, 2024, to fully float the Egyptian pound, a pivotal economic measure aimed at eliminating the parallel currency market (black market) and unifying the exchange rate through official channels. This decision was part of a broader package of economic reforms, supported by an agreement with the International Monetary Fund, and aimed at addressing the economic challenges facing Egypt, most notably the shortage of foreign currency and inflationary pressures. This decision was preceded by significant investment inflows, most prominently the Ras al-Hikma project deal with the United Arab Emirates, which provided substantial dollar liquidity and bolstered the economy's resilience to the shock of the float.
The importance of the event and its expected impact
Domestically, the rising dollar directly impacts import costs, potentially leading to higher prices for basic commodities and raw materials, and consequently, increased inflation that erodes citizens' purchasing power. However, experts believe that a unified and stable exchange rate in the long term will benefit the economy by enhancing the competitiveness of Egyptian exports, attracting more foreign direct investment, and revitalizing the tourism sector, a major source of foreign currency. Regionally and internationally, a stable exchange rate in Egypt boosts investor and international financial institution confidence in the Egyptian economy, underscores the government's commitment to structural reforms, and paves the way for increased international funding and support, reinforcing Egypt's position as a pivotal economic hub in the region.
