The Egyptian currency is facing challenging times as the pound has plummeted to near rock bottom, reaching a record low of 50.3 against the US dollar. This marks a troubling milestone for Egypt's economy. Analysts have observed a sharp fall in the Egyptian currency following statements from the country's central bank. The regulator announced it would determine the national currency's exchange rate based on the outcomes of free market trading. Against this backdrop, the US dollar's value surged dramatically. On Wednesday, March 6th, the American currency soared by 63%, climbing from 30.85 to 50.3 against the Egyptian pound. The Central Bank of Egypt made this decision after several unsuccessful attempts to maintain the national currency's exchange rate at its previous level, efforts that spanned several months. Additionally, the regulator aims to increase the overnight lending rate to 28.25% and the overnight deposit rate to 27.25%. These measures are necessary for further tightening of monetary policy and combating high inflation. The monetary authorities in Egypt justified the 600 basis points (bps) rate hike, partly based on recommendations from the International Monetary Fund (IMF). It is worth noting that one of the IMF's requirements is a flexible exchange rate for the Egyptian currency. According to sources, an agreement for $3 billion in financial support from the IMF could be signed shortly. Experts estimate that the Egyptian economy suffers from a chronic shortage of foreign currency, a situation that worsened at the beginning of 2022. Consequently, the Egyptian pound lost nearly 50% of its value against the greenback during several stages of devaluation. Later, the Egyptian authorities expressed intentions to abandon the national currency's peg to USD. Moreover, the government planned to create an Egyptian pound index to further normalize the economy.
