Egyptian pound falls as US dollar reserves dry up

The value of the Egyptian pound has dropped against the US dollar by 2 per cent over the past week. It lost 20 piasters of its value after the government reduced its value against the US currency by 10 more piasters on Sunday, reaching 7.73 pounds to the dollar. This is the second consecutive drop in the official market rate, although on the black market the price jumped to 7.80 Egyptian pounds to the dollar.

Economist Mamdouh Al-Wali expects the Egyptian strategic dollar reserve, which is now estimated at $20 billion, to run out in October due to the fact that it is being used but not being topped up. He suggested that the construction of 35 additional kilometres of the Suez Canal, which is expected to start next month, is unlikely to result in any increase in its revenues. Even before the new expansion, the canal can accommodate 78 ships, while the average number of ships crossing at the moment is 46 per day.

In a report posted on his Facebook page, Al-Wali said that despite the fact that the government borrowed $1.5 billion last month and raised the value of dollar deposit certificates locally to over 4 per cent, the Central Bank was forced to devalue the Egyptian pound against the dollar. There is a clear shortage of dollars in the market, a prolonged wait for dollars imposed on clients by their banks, and an imposition of fees in the form of percentages for providing the currency.

“The lack of dollar supply is caused by the decline in value of Egyptian exports and the limited direct foreign investment,” explained Al-Wali, “as well as the failure to implement the memorandums of understanding that were signed at the economic conference in Sharm el-Sheikh. In addition, foreign traders are heading towards withdrawing from the stock market because of the difficulty in transferring profits, the impact that violence has had on tourism, and the decrease in Gulf aid.”