2024-01-09 10:56:00
12:56 PM Tuesday 09 January 2024
Written by Manal Al-Masry:
Bankers whom Masrawy spoke to expected the price of the dollar to rise to about 38 and 40 pounds per dollar during the current year, with Egypt, represented by the Central Bank of Egypt, returning to exchange rate flexibility and eliminating the parallel market – the black market for currency trade, provided that sufficient dollar earnings are available to avoid an unexpected decline. For the pound.
During the last two years, the price of the dollar against the pound rose by about 96%, rising from 15.76 pounds in March 2022 to nearly 31 pounds, even during bank transactions today, which is a fixed price since March 2023, with Egypt returning to exchange rate flexibility after deviating from it during the Corona years 2020 and 2021. .
Despite the official decline of the pound in banks, the price of the dollar rose on the black market for speculation on the currency to 54 and 55 pounds, an increase of about 24 pounds from the official price in banks due to the pressures of foreign exchange shortages after the exit of indirect foreign investments amounting to about 22 billion dollars with the start of the negative consequences of the Russian-Ukrainian war. From the beginning of 2022.
Egypt is moving to continue adopting a flexible exchange rate policy to enhance the resilience of the Egyptian economy in the face of shocks in parallel with the improvement in foreign exchange earnings so that the gap between the official and unofficial exchange rates is covered within a specific period of time from 2024-2030, according to a recently issued government document.
This document issued by the Council of Ministers is entitled “Features of the strategic directions of the Egyptian economy during the period (2024-2030)” and is scheduled to be presented to community dialogue before it is approved and implemented.
Mohamed Abdel-Al, a banking expert, expected that the price of the dollar would not exceed 38 and 40 pounds as an official maximum in banks during the second quarter of this year, provided that an understanding is reached with the International Monetary Fund regarding the pending reviews of the economic reform program and the presence of foreign exchange proceeds in the hands of the Central Bank. Less than 5 and 8 billion dollars enables him to manage the exchange rate.
He explained his determination of the expected price of the dollar against the pound during the current year to be close to its current cost to importers from banks at about 38 pounds after adding fees and commissions for managing documentary credits for the purpose of importing, which contributes to not increasing prices in the market due to the expected reduction, as all basic commodities are priced at This limit.
In its previous report last June, Goldman Sachs International Bank ruled out Egypt’s return to a more flexible exchange rate for the pound against the dollar except after collecting foreign exchange earnings of no less than $5 billion in order to achieve this goal.
Abdel-Al added that lowering the price of the pound must be accompanied by a package of economic measures represented in rationalizing the import bill for recreational and provocative goods to reduce currency depletion and ease pressure on the dollar, as the most important goal of liberalizing the exchange rate is to stabilize prices and reduce inflation.
Abdel-Al added that the price of the dollar on the black market is exaggerated and does not represent the true value of the pound due to increased speculation from currency manipulators.
During the past year, banks allowed the acceptance of concessions on the dollar from parties related to importers, whether private individuals or exporters, with the aim of giving them priority to open documentary credits for them without waiting for their turn on waiting lists, on the condition that about 20% of the total concessions are waived to the banks to be used to finance basic goods, which contributed In accelerating the pace of imports and relieving pressure on banks, according to banking sources that Masrawy spoke to at the time.
Mohamed Badra, former CEO of one of the Gulf banks, suggested that the price of the dollar would rise by about 25% during the current year to range between 38 and 39 pounds, provided that it does not exceed 40 pounds by the end of 2024, with the availability of foreign exchange proceeds under the control of the Central Bank, enabling it to eliminate the black market upon returning to… Exchange rate flexibility.
Regarding his expectations for the levels of the pound against the dollar after 2024, Badra said that it is difficult to predict the exchange rate after this year unless the war being waged by Israel on the Gaza Strip is resolved and its consequences on Egypt’s official foreign exchange resources such as tourism, the Suez Canal, and remittances from Egyptians working abroad are studied.
Central Bank data showed that Egypt lost about $13.9 billion from 5 main sources of foreign exchange flows in the first 9 months of 2023, compared to the level at which flows were during the same period in 2022, declining to about $65.6 billion as remittances from Egyptians working abroad and investments declined. Direct by about 30% for each supplier.
An economic analyst, who preferred to remain anonymous, expected the price of the dollar to rise to 40 pounds or a little more during the current year, which represents the fair price of the pound’s exchange rate, provided that a package of other measures are taken, such as tightening monetary policy, i.e. raising the interest rate, to curb inflation and promote investment in the pound instead of the dollar. Tightening control over markets.
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