On Sunday, July 5, the Central Bank of Egypt devaluated the Egyptian pound six percent against the US dollar, to a rate of 4.15 pounds per dollar. This accounts for the second devaluation of the pound in the past six months, according to AFP news agency.
The economic policy with regards to the Egyptian currency is to allow a fluctuation of the exchange rate of up to three percent in either direction. Among the intentions of the devaluation is to increase exports, boost confidence among Egyptians with regards to the economy, and lower incentive for black market activity where the dollar has been trading at around four pounds.
Following the devaluation, banks were quoting the pound at at buy and sell rate of 3.89 and 3.91 pounds respectively, which accounts for an official rise in the exchange rate of 0.25 pounds. Sources stated that the pound was exchanged on the black market at a rate of 4.18.
The Egyptian currency was devaluated to 3.85 pounds to the dollar at the end of January, following years of having been pegged at a rate of 3.4 pounds.
The unrelenting economic recession that has been clouding Egypt in the past three years has lead to lower exports, weak foreign investments and capital flight, and a severe liquidity shortage coupled with an insufficient supply of the US dollar.
As a means of stimulating financial and economic activity and raising investors confidence, the Egyptian central bank cut the borrowing rate twice—each at 50 basis points—as interest rates fell from 12 to 11 percent. — (MENA Report)
© 2001 Mena Report (www.menareport.com)
