According to sources, the exchange rate of the US dollar in Egypt’s black market has stabilized between 39 Egyptian pounds and 39.5 Egyptian pounds, following a decline in gold prices. Over the past seven days, the dollar had experienced a surge of approximately one Egyptian pound, rising from 38 to 38.5 pounds per dollar to its current rate. Some observers attribute this increase in demand to gold imports, which registered a temporary spike before declining once again.
Dollar Price Image Source: Reuters
The stability of the dollar’s price in the black market is due to a decrease in sales by traders despite significant demand from citizens.
Furthermore the decline in gold prices contributes to this stability.
Global institutions anticipate a potential 20% devaluation of the Egyptian pound against the US dollar nearing the levels witnessed in the black market.
These expectations arise as the first and second reviews of the International Monetary Fund’s (IMF) economic reform program in Egypt approach. These reviews are crucial for ensuring continued cooperation and the disbursement of a $3 billion loan.
In a recent report regarding Egypt’s credit rating review, Moody’s credit rating agency predicted a 20% devaluation of the pound against the dollar. This discrepancy represents the difference between the pound’s value in banks versus its black market trading rate.
Morgan Stanley, an American global bank, foresees a further reduction in the pound-to-dollar exchange rate, likely in September or October around the time of the second review of the IMF.
The bank believes that Egypt needs to achieve progress in exchange rate flexibility to improve its external situation in the long term.
Egypt’s return to a flexible exchange rate regime in March 2022 resulted in a sharp decline in the pound’s value, contributing to a 96% increase in the average dollar price compared to the previous year. The average exchange rate in banks rose from 15.76 pounds on March 20, 2022, to over 30 pounds currently.
Over the past 16 months Egypt has faced pressures from decreased foreign cash flows with $22 billion leaving the country in the past year due to the negative repercussions of the Russia-Ukraine conflict.
