The Egyptian pound is at its lowest level and breaks the barrier of 50 pounds to the dollar economy

The Egyptian pound ended local trading today, Thursday, at its lowest levels ever, closing at 50.0024 against the dollar after exceeding the 50-pound barrier for the first time since last March.

The Egyptian currency has been trading at levels slightly below 50 pounds to the dollar since Cairo signed an $8 billion loan agreement with the International Monetary Fund on March 6. Under the agreement, Egypt pledged to allow supply and demand factors to determine the value of the currency.

Bankers, analysts and brokers in trading activities said that the currency has been under strong pressure in the past few weeks ahead of the maturity date of treasury bills in pounds held by foreign investors, as well as the maturity dates for other payments.

In the weeks following Egypt’s signing of the IMF agreement, foreigners were major buyers of 9-month and 12-month Treasury bills, which mature in December and March, and this could lead to a potential rise in demand for the dollar if enough people seek… From investors to get their money back.

According to a banker’s calculations based on central bank data, more than one trillion pounds worth of local currency treasury bills expire in December and March.

According to IMF data, Egypt is also scheduled to pay $933 million to the Fund in the second half of December, which are payments related to previous loans.

The rapid growth in the money supply in Egypt also contributed to pressure on the exchange rate and increased inflation, as the money supply (M-2) grew by about 29.59% in the year until the end of September, compared to about 2.6% in the United States.

Over the year prior to the agreement with the IMF, the Central Bank kept the exchange rate fixed at 30.85 pounds to the dollar, and this led to a severe shortage of foreign currency in the Egyptian market and a slowdown in vital imports.

Big decline

On March 6, the day the Central Bank of Egypt allowed a significant decline in the currency, the dollar exceeded the 50 level against the pound for the only time in its history, but it ended trading that day at 49.5 pounds to the dollar.

This comes 5 days after Egyptian Prime Minister Mostafa Madbouly said about the possibility of the pound declining by 4% or 5%.

It is noteworthy that Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund, said that the international institution is committed to the flexibility of the Egyptian pound’s exchange rate when talking about Egypt’s lending program.

Egypt reached an agreement with the International Monetary Fund in 2022 to borrow $3 billion, but the agreement was halted until the Fund increased its value to $8 billion last March.

4 companies

In a context related to the borrowing agreement from the IMF, Madbouly said in a press conference yesterday that Egypt intends to list 3 or 4 companies affiliated with the armed forces on the stock exchange, and added that he will announce the offering plan during the next week.

The IMF mission concluded its discussions with the government last month, and said at its conclusion that it had made significant progress in discussing policies to complete the fourth review within the framework of the Extended Fund Facility (Egypt Lending Program).

The review, which could provide financing of more than $1.2 billion, is the fourth in the Fund’s 46-month loan program, which was approved in 2022 and increased to $8 billion this year after an economic crisis that witnessed high inflation and a severe shortage of hard currency.

The Fund said that Egypt “implemented key reforms to maintain macroeconomic stability,” including unifying the exchange rate that facilitated imports in light of the Central Bank of Egypt’s repeated pledge to maintain a flexible exchange rate system.

The Fund added, in a previous statement: “Discussions will continue during the coming days to complete agreement on the remaining policies and reforms that may support the completion of the fourth review.”

The demand to limit the state’s role in the economy is fundamental to the IMF, according to the program.