Egyptian Pound Devalued to Record Low against the US Dollar

The Egyptian Pound has slid by more than 14 percent against the United States’ Dollar as of Thursday 27, October, reaching an all-time low at EGP 22.8 for every USD 1. While Egypt has secured a loan from the International Monetary Fund amid major economic strife, this devaluation is forecasted to increase over the coming months, according to the Abu Dhabi Commercial Bank PJSC.

This drop follows a depreciation in March, which saw the pound slip an initial 14 percent. Bloomberg Economics estimates the pound needs to weaken to EGP 24.6 per USD 1 “to bring Egypt’s trade deficit to a reasonable level.”

The Central Bank of Egypt (CBE) has responded by announcing a two percent hike in interest rates for the fourth quarter of 2022. This raises lending rates to 14.25 percent, and deposit rates to 13.25 percent respectively. The decision is intended to “uphold the CBE’s mandate of ensuring price stability in the local market over the medium term.”

Earlier in the week, and ahead of the CBE’s efforts, Prime Minister Mostafa Madbouly announced the increase of minimum wage pay for public employees from EGP 2,700 (USD 118.6) to EGP 3,000 (USD 131.8). Egypt’s Minister of Finance, Mohamed Maait, added that more than 10.5 million pensioners will benefit from this decision.

The decision comes as part of the government’s “new EGP 67 billion social protection package, as per President Al-Sisi directives during the recent Economic Conference.”

Egypt has been weathering major inflation and currency devaluation over the past few months, with only trace amounts of foreign currency flowing into the country. In the wake of the Russia-Ukraine war, the situation has resulted in “dire economic ramifications” and major capital outflows.

Several governmental initiatives have been launched to combat rising prices and currency scarcity, including a customs-free car import initiative expected to bring USD 2.5 billion into the country