For the first time in eight years, US Dollar exchange rate exceeded the level of EGP 6.15 in a number of banks, following the political and social unrest.
The Central Bank of Egypt has stated that the average interbank rate for USD is EGP 6.13; however the three top banks in Egypt, The National Bank of Egypt, Banque Misr and the Commercial International Bank (CIB) said they are selling dollars at EGP 6.15.
“The raise was mainly due to political tensions and that there were no signs of a breakthrough in the political crisis. The exchange rate will continue to increase as long as the tension persists,” said the Treasury and International Markets Manager at Industrial Development Bank, Haytham Abdel Fattah. He explained that in a net importing country, the fluctuating exchange rate could have a huge impact on inflation levels, “we import the majority of nutritional items, such a lift will negatively affect the prices” added the banker.
As regards whether the increase in U.S Dollar price is a result of policies dictated by International Monetary Fund (IMF), Abdel Fattah stated that nothing was announced which could confirm this.
The CBE has defended the exchange rate in the post revolution period, a policy that cost $20 billion of foreign reserves in 22 months. With the reserves reaching $15 billion at the end of November, the bank’s ability to preserve the pound’s value has significantly weakened.
The preliminary agreement signed with IMF last month stipulates that the bank has to adopt a monetary policy that permits the promotion of foreign trade and investment, which may imply allowing the EGP to fall in value.
“Fluctuations of exchange rates are a matter of market forces, it’s all about supply and demand and apparently there is high demand on the U.S. Dollar,” Treasurer of National Bank of Egypt, Zainab Hashem, told Daily News Egypt. The increase in demand could be justified by political tensions, but, according to Hashem, the affect is not certain according to her. She didn’t exclude the possibility of the IMF influence, adding “the market is very volatile, and that it is very difficult to predict.”