Egypt’s central bank kept the pound steady at the official rate on Tuesday, while it traded at an unprecedented 18 pounds to the dollar on the black market in the past two days.
The central bank said it sold $120 million at the weekly sale, with the cut off price stable at the official rate of 8.78 pounds per dollar, according to sources.
The national currency has been witnessing successive declines over the past weeks amid mounting speculation that the central bank would devalue the currency.
Prime Minister Sherif Ismail told the parliament on Monday that the government is working with the central bank to unify the dollar exchange rate, stressing that the action will be taken soon.
He said the previous adjustment to the pound exchange rate led to negative outcomes because it took place in the absence of “proper instruments.”
Egypt devalued the pound to its current official rate of 8.78 in March, however the move failed to offset the widening gap between the official and the parallel rates or boost dollar liquidity.
In its research paper, Pharos said that a managed float of the pound would be better from a political standpoint than a complete flotation due to fears of price hikes.
The devaluation is seen as part of the Egyptian government’s comprehensive reform programme and one of several prerequisites set by the International Monetary Fund in order for Egypt to finalise a $12 billion loan agreement this year.
IMF chief Christine Lagarde said in an interview with Bloomberg on Thursday that there is currently a “currency crisis” in Egypt, adding that the difference between the official and unofficial rates has reached 100 percent.
Egypt announced that its net foreign reserves jumped to $19.59 billion at the end of September, its highest in over a year. The central bank governor has said he would consider letting the pound float freely if reserves exceed $25 billion.
The country had roughly $36 billion in reserves before the 2011 uprising.
Credit: All Africa