Egyptian pound continues nosedive against US dollar

 01 Nov 2016 - 15:02

Egyptian pound continues nosedive against US dollar

By Hussein Abdel-Fattah  / AA

CAIRO: The Egyptian pound (EGP) lost yet more ground against U.S. currency by the end of October, with the exchange rate exceeding 18 pounds to the dollar on the black market, while Egypt’s central bank maintained the official rate at 8.88 EGP to the greenback.
On Egypt’s now-outlawed parallel market, the value of Egypt’s currency has fallen dramatically over the course of this year.
In January, the black market price for the U.S. dollar stood at some 8.75 EGP, while the official exchange rate was kept at 7.73.
Ten months on, however, the EGP’s value has plummeted against the greenback by more than 100 percent, hitting a whopping 18 EGP -- the lowest-ever rate in Egypt’s history -- in the final days of October.
To mark the occasion, Egyptian social-media users on Monday launched a Twitter hashtag -- "+18" -- that has since gone viral.
Egyptian black-market currency traders told Anadolu Agency that the market was currently experiencing an "exceptional" demand for U.S. currency.
"The exchange markets are in a state of uncertainty," one trader told Anadolu Agency on condition of anonymity, as the authorities earlier this year criminalized currency trading at anything other than the official exchange rate.
"Everyone’s awaiting a decision by the central bank to either devalue the pound or let the currency slide into free float," he said. 
Notably, currency devaluation is one of the conditions laid out by the IMF for a requested $12-billion loan to Egypt.
On Sunday, Pharos Holding, a Cairo-based investment bank, predicted that the central bank would officially devalue the pound by some 35 percent -- to between 11 and 12 EGP to the dollar -- sometime in November.
After decades of pegging the pound to the dollar at roughly 3.5, Egypt’s financial authorities in 2003 introduced a "managed float" policy, which saw the local currency gradually lose value against the greenback.
Following Egypt’s 2011 popular uprising, which ended the 30-year rule of autocratic President Hosni Mubarak, the Egyptian pound tumbled to 5.8 to the dollar. 
During the one-year rule of Mohamed Morsi, Egypt’s first democratically elected president (ousted in a 2013 military coup), the currency fell further to some 7 pounds to the dollar. 
Since then, the Egyptian pound has continued to fall due to acute hard-currency shortages in the local market, along with recent declines in tourism, foreign investment and exports due largely to ongoing political turmoil.