Egypt Devaluation Rages Again as New Currency Policy Moves Ahead

The Egyptian pound fell to yet another record low, a sign that authorities are pressing ahead with a shift to more flexible currency trading, Bloomberg News reported. The currency slumped as much as 14% to 32.1 per dollar before paring losses to close at 29.8 on Wednesday, capping the largest single-day drop since late October. That’s narrowed the gap against prices quoted in the black market, the so-called parallel exchange rate of about 31, according to traders. Egypt’s latest devaluation, its third in less than a year, is heaping further stress on the economy after authorities secured a $3 billion bailout package from the International Monetary Fund. The IMF said on Tuesday that Egypt is moving toward a flexible foreign-exchange policy and any intervention by the central bank will be guided by the need to smooth out market volatility. The IMF also warned that the durability of Egypt’s policy shift “remains to be proven and the central bank may face political and social pressure to reverse course” and said “fiscal consolidation in the context of rising living costs” could see similar pushback. Foreign exchange remains scarce as the economy of the Middle East’s most populous country contends with soaring food and energy prices fanned by Russia’s war in Ukraine. Egypt needs to unlock more financing from abroad as it tries to clear the logjam of imports at its ports that’s adding to a backlog of unfulfilled demand for dollars. Read more.