Egypt floated the country’s pound Thursday as part of a raft of reforms, after a dollar crunch and exorbitant black market trade threatened to grind some imports to a halt.
The government of President Abdel Fattah al-Sisi is rolling out an austerity program and seeking billions in support from abroad in order to meet conditions for a $12 billion loan from the International Monetary Fund.
Floating the pound had long been among a list of measures demanded by investors and international creditors.
Thursday’s central bank decision came as a surprise, after officials said they would only consider floating the pound once foreign reserves reached $25 billion, up from September’s $19.6 billion.
The bank said in a statement it had moved to a “liberalised exchange rate… to create an environment for a reliable and sustainable supply of foreign currency.”
Egypt has struggled to boost its foreign currency reserves in the political and economic turmoil following the January 2011 uprising that toppled former ruler Hosni Mubarak.
The central bank’s move follows comments last week from IMF chief Christine Lagarde claiming Egypt was undergoing a currency “crisis” and suggesting a quick devaluation to tackle a widening gap between the official and black market rates.
Following Thursday’s announcement, the dollar was trading on official markets at between 13.5 and 14 Egyptian pounds, according to several banks, up sharply from the previous official rate of 8.8.
Egypt’s EGX 30 index jumped more than 8 percent after opening to 9231 points.
On the black market this week the dollar was trading at a historic high of 18 pounds before losing its value amid speculation of a devaluation.
Importers and businesses had been forced to resort to the black market for dollars, with the high prices making their businesses increasingly unfeasible.
The central bank said banks would be allowed to open until 9pm (1900 GMT) and over the weekend to make transactions.
Source: AFP
