The US dollar’s value continued to increase against the Egyptian pound in the informal currency exchange market on Wednesday.
Despite the growing gap between the formal and informal market, Governor of the Central Bank of Egypt (CBE) Tarek Amer has denied any intention to decrease the value of the pound against the US currency.
Informal market traders began trading the US dollar at an exchange rate exceeding EGP 11.30 on Wednesday. The increase was driven by importer’s demand for US dollars to cover import procedures for non-essential goods. The CBE has prohibited banks from trading US dollars in the formal market to cover the import of non-essential goods.
Despite the widespread expectation that the CBE will move to close the widening gap between the formal and informal market to regain control of economic fiscal policy, Amer affirmed that the CBE has no intention of devaluing the Egyptian pound beyond its current valuation.
Amer was in Washington DC to attend the meetings of the International Monetary Fund (IMF) .
Amer stated speculation in the informal foreign currency exchange market has caused unjustified increases in the value of the US dollar against the Egyptian pound. Further, Amer condemned those proliferating rumours of a coming devaluation in the formal market, stating such rumours harm the country.
Informal market traders’ speculation on the price of the US dollar is one of the principal inflationary pressures in the Egyptian economy while it is not the only reason, according to Osama El-Menilawy, the assistant finance sector general manager at a private bank operating in Egypt.
While much of the demand comes from importers attempting to circumvent the CBE’s restrictions on non-essentials goods, there is also demand in the informal market to acquire foreign currency to cover the import procedures of basic goods, according to El-Menilawy. Importers who do not receive the full value needed to insure their import from banks, often must turn to the informal market.
El-Menilawy does not expect the CBE to devalue the Egyptian pound further. However, it is not known whether Amer’s statements are merely an attempt to sway public opinion and instil confidence in the market.
At the same time, the CBE is not expected to float the Egyptian pound, according to a prominent banker. The banker called for the CBE and the government to be transparent with the Egyptian people about the foreign currency situation.