The US dollar saw a slight decline against the Egyptian pound at the close of trading on Tuesday in Egyptian banks, continuing its trend of stability and a slight improvement in favor of the local currency. This move follows a period of significant volatility after the Central Bank of Egypt's historic decision to fully liberalize the exchange rate in March 2014, a decision aimed at eliminating the parallel market and unifying the exchange rate.
General context and historical background of exchange rate liberalization
Prior to the flotation decision on March 6, 2024, the Egyptian economy faced significant challenges, including the existence of two exchange rates: an official rate at banks and a parallel (black) market rate with a substantial difference. This led to a severe shortage of foreign currency and negatively impacted imports and investment. The Central Bank's decision to raise interest rates by 600 basis points and float the currency was part of a broader economic reform package. This coincided with a comprehensive agreement with the International Monetary Fund and a significant influx of foreign investment, most notably the Ras al-Hikma development project, which provided substantial dollar liquidity to the market.
The importance of the stability of the pound and its economic impact
Maintaining a stable exchange rate for the Egyptian pound against the US dollar is of paramount importance to both the local economy and investors. Domestically, the exchange rate directly impacts inflation rates, as a weaker dollar reduces the cost of imported goods, whether raw materials for industry or consumer goods, thus helping to curb price increases and alleviate the burden on citizens. From an investment perspective, a flexible and unified exchange rate boosts foreign investor confidence and encourages increased direct and indirect investment, as it eliminates uncertainty and facilitates profit repatriation. Furthermore, currency stability supports increased remittances from Egyptians working abroad through official channels.
Dollar exchange rates at major Egyptian banks today, Tuesday
Below are the details of the dollar exchange rates in a number of government and commercial banks at the end of trading:
- The Central Bank of Egypt: The buying price was recorded at 46.97 Egyptian pounds, and the selling price at 47.11 Egyptian pounds.
- National Bank of Egypt: The purchase price was recorded at 47.00 Egyptian pounds, and the selling price at 47.10 Egyptian pounds.
- Bank of Egypt: The buying price was recorded at 47.00 Egyptian pounds, and the selling price at 47.10 Egyptian pounds.
- Commercial International Bank (CIB): The purchase price was recorded at 47.00 EGP, and the selling price at 47.10 EGP.
- Bank of Alexandria: The buying price was recorded at 47.00 Egyptian pounds, and the selling price at 47.10 Egyptian pounds.
- Suez Canal Bank: The buying price was recorded at 47.00 Egyptian pounds, and the selling price at 47.10 Egyptian pounds.
- Abu Dhabi Islamic Bank: The buying price was recorded at 47.04 pounds, and the selling price at 47.14 pounds.
- Cairo Bank: The buying price was recorded at 47.02 Egyptian pounds, and the selling price at 47.12 Egyptian pounds.
- National Bank of Kuwait: The buying price was recorded at 46.98 Egyptian pounds, and the selling price at 47.08 Egyptian pounds.
- Faisal Islamic Bank: The purchase price was recorded at 47.00 pounds, and the selling price at 47.10 pounds.
These prices reflect a state of relative equilibrium in the market, as banks continue to provide dollars to meet the needs of importers and individuals, thus enhancing the stability of the economic system in the post-float phase.
