The exchange rate of the US dollar continued to rise against the pound on Monday, and added 6 pt. to its value, gaining about 17 pt. of its losses against the local currency over the past period.
The average dollar price in bank transactions with customers on Monday reached EGP 15.6569 for buying and EGP 16.7569 for selling, compared to EGP 15.5944 for buying and EGP 15.6944 for selling on Sunday.
On Monday, the official price of the dollar at the Central Bank of Egypt (CBE) reached EGP 15.6543 for buying and EGP 15.7761 for selling, compared to EGP 15.5865 for buying and EGP 15.713 for selling on Sunday.
The price of the dollar in banks reached EGP 15.4964 for buying and EGP 15.5964 for selling on 23 February, and its official price was EGP 15.4784 for buying and EGP 15.6071 for selling, which is the lowest level the US currency against the pound has reached since the liberalisation of the exchange rate on 3 November 2016.
Just as the foreign exchange inflows Egypt received were a major reason for the depreciation of the dollar against the pound during the last period, the local currency has been negatively affected by the exit of some indirect foreign investments in government debt instruments, affected by foreign investors fleeing emerging markets with Coronavirus.
According to Mohamed Abdel Aal, a well-known banking expert, the developments affecting the Egyptian pound, similar to most countries’ currencies around the world, may all have negative effects in the short term, leading dealers to flee to safe haven currencies at the expense of others.
He explained that it is related to the long and deep crisis of the Coronavirus and the extent of international success in containing its spread.
“In my opinion, the Egyptian pound will settle near its current levels with a tendency to decline, and we may see it returning to a level near the EGP 16 mark again as a result of this crisis,” said Abdel-Aal.
On the other hand, he pointed out that an understanding could be considered with the International Monetary Fund (IMF) to obtain technical assistance. Moreover, coordination with the World Bank (WB) can take place, as it has already announced it will be providing an initial package of up to $12bn for immediate support to help countries overcome the health and economic effects of the Coronavirus outbreak.
Abdel-Aal stressed that thinking about exceptional short-term plans to provide local alternatives to strategic import chains would be very useful to avoid any future crises, as the most important means of stimulating economic growth possible in those circumstances is reducing the discouraging interest rate. Additionally, more initiatives for microfinance activities should be launched, as well as supporting service sectors, such as transportation, tourism, and food activities.
He noted that these activities help create demand, and that there should be more initiatives directed exclusively to industries that give importer substitutes.