The Pound Returns To Fall Against The Dollar
Egyptian banks finished financing all import requests pending at the ports for basic commodities, eliminating the waiting list that extended for months amid a dollar liquidity crisis that the country was suffering from during the past two years, before dollars flowed in abundance after liberalizing the exchange rate and raising interest rates significantly.
11 senior bankers in various banks operating in Egypt confirmed to Al-Sharq that the waiting list for all goods present at the ports has been eliminated, especially food, pharmaceutical, fodder, and production requirements. During an extraordinary meeting on March 6, the Central Bank of Egypt raised the key interest rate by 600 basis points to 27.25%, and this was followed by the liberalization of the pound’s exchange rate, paving the way for an increase in the International Monetary Fund’s loan to the most populous Arab country from 3 to 8 billion dollars.
Yahya Abu Al-Futouh, Vice Chairman of the Board of Directors of the National Bank of Egypt, the largest government bank in the country, told Al-Sharq that “there is not a single document remaining or any credit even with his bank for basic commodities and production requirements. The only remaining items are some luxury goods such as cars.” And mobile phones. Within a few weeks in March, Egypt escaped its worst currency crisis in decades to become the most attractive and hottest emerging market.
The rapid change in its wealth began with a $35 billion tourism development deal with the Emirates, which is the largest foreign investment in Egypt’s history. This led to an infusion of dollars that paved the way for record interest rate hikes, an expansion of the IMF loan, and an influx of billions of dollars of foreign hot money into government debt instruments.
The recent liberalization of the exchange rate raised the price of the dollar against the Egyptian currency by more than 60%, reaching 49.45 pounds, before the pound rose again at slight rates during the following days, reaching a limit of 46.5 pounds per dollar. The Central Bank of Egypt expected, when raising the exceptional interest rate three weeks ago, that inflation would exceed its target rate of 7% (±2 percentage points) on average during the fourth quarter of 2024. The head of one of the major private banks in Egypt told Al-Sharq, stipulating His name was not published: “We have finished financing all import requests for basic goods, with the exception of 13 luxury and recreational goods that require the approval of the Central Bank to provide the necessary financing to import them.”
An official at the Central Bank of Egypt also explained to Al-Sharq that all banks operating in Egypt “have finished managing all pending import requests and are currently conducting new daily business.” The head of the Customs Authority, Al-Shahat Ghatouri, told Al-Sharq that his country “released more than $14.5 billion worth of goods from last January until the end of last week.”
At the beginning of this month, the Central Bank of Egypt directed banks to procure foreign currency to import 17 commodities, provided that they are present in Egyptian ports, including medicines, medical supplies, serums, fodder, food commodities, fish, dairy, fertilizers, and oils. An official at a private bank in Egypt who spoke to Al-Sharq expected that “the Central Bank will soon issue a decision to lift the ban on financing 13 luxury goods after the abundance of foreign currency in the banks.”
