The Egyptian pound continued its remarkable recovery against the US dollar at the start of the week, with the exchange rate falling further to settle below 53 pounds in most Egyptian banks. This development builds on the positive performance the local currency has shown in recent weeks, reflecting increasing stability in the foreign exchange market after a period of sharp fluctuations.
Historical background: The end of the parallel market
This stability follows decisive decisions taken by the Central Bank of Egypt on March 6, 2024, which included a complete liberalization of the exchange rate, or what is known as a "managed float," and a 600 basis point increase in interest rates at an extraordinary meeting. These measures aimed to eliminate the parallel (black) market for currency, where the dollar had reached record highs exceeding 70 Egyptian pounds earlier in the year, and to unify the exchange rate through official channels. This step succeeded in restoring foreign currency inflows to the banking sector, after they had been largely channeled into the informal market.
The importance of the event and its economic impact
The Central Bank's decisions would not have been successful without the massive dollar inflows that bolstered foreign currency reserves. Chief among these inflows was the landmark investment deal for the Ras al-Hikma project with the United Arab Emirates, which injected $35 billion into the Egyptian economy. In addition, an agreement was reached with the International Monetary Fund to increase the loan program from $3 billion to $8 billion. This substantial dollar liquidity enabled the Central Bank to meet the accumulated demand for foreign currency and support exchange rate stability following the flotation.
This improvement has a positive impact on the macroeconomy, as the stable exchange rate helps curb inflation by reducing the cost of imported goods. It also boosts the confidence of both foreign and domestic investors and encourages the return of "hot money" to invest in government debt instruments. Furthermore, remittances from Egyptians working abroad have seen a significant increase through official channels following the elimination of the parallel market.
Details of exchange rates at banks
According to the latest data, exchange rates varied slightly between different banks:
- Highest price: The dollar recorded its highest price at the National Bank of Kuwait and the Egyptian Gulf Bank at a level of 52.67 pounds for buying and 52.77 pounds for selling.
- Lowest price: The lowest exchange rate for the dollar at Emirates NBD Bank was 52.41 Egyptian pounds for buying and 52.51 Egyptian pounds for selling.
- Major banks: In the two largest government banks, the National Bank of Egypt and Banque Misr, in addition to the Arab International Bank, Credit Agricole and Midbank, the dollar was priced at 52.51 Egyptian pounds for buying and 52.61 Egyptian pounds for selling.
- Central Bank: The average official exchange rate at the Central Bank of Egypt reached a level of 52.63 Egyptian pounds for buying and 52.77 Egyptian pounds for selling.
This strong performance of the Egyptian pound shows the beginning of a new phase of economic stability, supported by structural reforms and large investment inflows, which inspires optimism about the economy’s ability to overcome the challenges it has faced in recent years.
