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Desperate for Dollars? A Brief Explainer of What the Devaluation of the Egyptian Pound Means

October 28, 2022

Egyptians woke up on Thursday to more news anxiety, with the local currency sliding to a record new low, falling by more than 14 percent against the U.S. dollar. The news comes after the Central Bank of Egypt’s acting governor, Hassan Abdalla, said during Egypt’s Economic Conference on Sunday that Egypt will develop a new currency indicator based on a basket of several currencies as well as, possibly, gold. The acting director added that Egypt is aiming to change the culture that the Egyptian pound should be solely pegged to the U.S. dollar to reduce the effects of major currency fluctuations on investment performance. Though he did not provide any additional details, analysts have pointed out that the move reflects a shift in the direction of the economy, as Egypt’s current biggest trade partners are China and Saudi Arabia, not the United States. In the same vein, Prime Minister Mostafa Madbouly spoke at the same conference to overturn claims that the value of the currency against the US dollar indicates the strength of the economy. He noted that a weaker currency is sometimes necessary to strengthen the economy through increasing…

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