On Monday, the dollar exchange rate in Egypt’s banks went up following an auction by the Central Bank of Egypt (CBE) to sell $40m.
The dollar exchange rate increased to EGP 7.28 in the National Bank of Egypt, one of the biggest government-owned Egyptian banks, while the rate at Banque Misr reached EGP 7.28.
By the end of last week, the dollar exchange rate was at EGP 7.18, according to the figure set by CBE.
Economists stated that the exchange rate increased by five piasters in the black market following the CBE auction on Sunday, which will have a negative impact on consumer and strategic goods, including medicine, oil, and production supplies.
In foreign exchange companies, the dollar exchange rate increased to EGP 7.85 for selling, according to Mohamed Radwan, Chairman of the Board of Directors of Sinai Exchange Company.
One chairman of a foreign exchange company, however, declared that soon the dollar exchange rate will reach EGP 8 following the impact on the formal market, adding that the rate will only decline if CBE and the Ministry of Finance make immediate reforms in the monetary policy.
The official, who asked to remain anonymous, mentioned that demand on the dollar is very high in the black market, and the lack of offers will contribute to the increase in the exchange rate of the currency.
He also said that some speculators are not currently selling in hopes that the rate will reach EGP 8 by the end of next week.
The increase of the dollar exchange rate in the formal market in two days makes it possible for another increase to reach EGP 7.5, according to Ahmed Shiha, Chairman of the importers division in the Federation of Egyptian Chambers of Commerce (FEDCOC).
Shiha said that the upcoming time period will witness a price increase, especially in food and clothing.
He accused foreign exchange companies and speculators of being behind this increase, adding that import operations for consumer goods funded by the black market are at 18%, while imports of intermediary and strategic goods funded by the banking system are at 82%.
On the contrary, Radwan believes that the increase in the exchange rate will not continue because of the CBE’s policy to move the exchange rate up against the Egyptian pound in the formal market, and pump more dollars to fill the demand of manufacturers and currency traders.
Radwan expects that the exchange rate will reach EGP 7.5 in a very short time, which will narrow the gap between the price of the formal market and the black market.
Medicine industries are one of the most affected industries by the rate, according to Mohamed El Bahi, Chairman of the medicine industries chamber at FEDCOC.
Previously, the chamber repeatedly requested that the government work on lowering the losses medicines endure, but the government continued to postpone the decision.
According to El Bahi, the stable medicines price limits the industry’s capacity to develop and face smuggled medications which currently form 40% of the market in Egypt.