The US dollar exchange rate against the Egyptian pound remained relatively stable at the start of trading on Tuesday morning in most public and private banks operating in Egypt. This stability follows a period of significant fluctuations in the exchange market after the Central Bank of Egypt's decision in March 2014 to fully liberalize the exchange rate, a measure aimed at eliminating the parallel market and unifying the exchange rate through official channels.
Historical background and context of exchange rate stability
This current stability is a direct result of the monetary policies adopted by the Central Bank of Egypt over the past few months. After years of pegging the exchange rate, the Egyptian economy faced challenges including a severe shortage of foreign currency and a thriving parallel market (black market), resulting in two widely divergent exchange rates for the dollar. On March 6, 2024, the Central Bank made a decisive move by raising interest rates by 600 basis points and allowing the exchange rate to be determined by market forces of supply and demand. This decision led to an immediate devaluation of the Egyptian pound, with the dollar jumping from around 31 pounds to nearly 50 pounds, before gradually stabilizing at its current levels.
The importance of the event and its economic impact
Exchange rate stability is of paramount importance to the Egyptian economy at all levels. Domestically, this stability helps curb inflation, which has reached record levels, given that a large portion of Egypt's essential goods and raw materials are imported using US dollars. It also provides a more predictable environment for local investors and businesses, enabling them to better plan their operations and costs. Internationally, a unified and flexible exchange rate enhances the confidence of foreign investors and international institutions such as the International Monetary Fund, which approved an increase in its loan to Egypt following these reforms. Furthermore, significant cash inflows, most notably the Ras al-Hikma project deal with the UAE, have provided substantial dollar liquidity, supporting market stability.
Dollar exchange rates in major Egyptian banks today, Tuesday
- The Central Bank of Egypt: The dollar recorded a price of 46.82 Egyptian pounds for buying and 46.96 Egyptian pounds for selling.
- National Bank of Egypt: The dollar was priced at 46.86 Egyptian pounds for buying and 46.96 Egyptian pounds for selling.
- Bank of Egypt: The dollar price recorded 46.86 Egyptian pounds for buying and 46.96 Egyptian pounds for selling.
- Commercial International Bank (CIB): The dollar was priced at 46.83 Egyptian pounds for buying and 46.93 Egyptian pounds for selling.
- Bank of Alexandria: The dollar recorded a price of 46.86 Egyptian pounds for buying and 46.96 Egyptian pounds for selling.
- Suez Canal Bank: The dollar price stabilized at 46.88 Egyptian pounds for buying and 46.98 Egyptian pounds for selling.
- Abu Dhabi Islamic Bank: The dollar was priced at 46.88 Egyptian pounds for buying and 46.98 Egyptian pounds for selling.
Market participants are anticipating that this stability will continue, supported by improved flows from key sources of foreign currency such as tourism, remittances from Egyptians abroad, and foreign direct investment.
