Crippling dollar shortage forces Egypt to devalue currency 13%
Chart: Egypt devalues its currency - pic.twitter.com/EI9H5317K1— SoberLook.com (@SoberLook) March 14, 2016
The treasury says it plans to adopt a “more flexible exchange rate” policy to boost the country’s foreign reserves and to attract investment into the banking system.
Earlier the regulator sold $198.1 million to local lenders at 8.85 Egyptian pounds per dollar.
The Egyptian pound has been declining in recent weeks, dropping to historic lows against the dollar on the black market.
BAJAJ AUTO— Yatin Mota (@YatinMota) March 14, 2016
-Egypt one of the top 3 export markets
-40% of sales come from exports
-Currency devaluation means costly imports, lower sales
The country's foreign currency reserves have plunged by over 50 percent since 2011. The central bank is focusing on increasing reserves to $25 billion by the end of the year, according to Egypt's state news agency.
A short dollar supply has strangled businesses and restricted Egypt’s capacity to import essential goods.
Until this morning's "depreciation", Egypt had the most overvalued currency in Emerging Markets according to our REER work (pinned tweet)— Charlie Robertson (@RencapMan) March 14, 2016
A key resource for the country is hard currency as tourism and foreign investment have never recovered from the years of turmoil since the 2011 uprising and political unrest.
Egypt’s tourism revenue has fallen by about $1.3 billion since a Russian airliner was blown up by terrorists over the Sinai Peninsula last October. Shortly after the crash Russia stopped all civilian flights to Egypt.
Tourism ban cost Egyptian economy $1.3bn https://t.co/RaZzo1bgFe— Egypt & MENA Updates (@Egy_U) March 1, 2016
Economists see the devaluation as a necessary step to boost Egypt’s competitiveness and bringing back foreign investors. However many Egyptians express concern the measure would cause a surge in prices.