This week, the Egyptian pound had its biggest one-day decline since the cash-strapped government agreed to a $3 billion deal with the International Monetary Fund in mid-December, according to authorities.
Approximately three weeks after Egypt and the IMF officially ratified the support package in exchange for a number of economic reforms carried out by the nation’s apex lender, including a switch to a flexible exchange rate, the pound dropped from around 24.7 for $1 to just over 26.3 against the dollar.
The plan permits Egypt to receive an additional $14 billion in potential funding.
Years of government austerity, the coronavirus pandemic, and the effects of the war in Ukraine have all had a significant negative impact on the Egyptian economy. The majority of Egypt’s wheat imports historically have come from eastern Europe, making it the top importer of wheat in the world.
The Egyptian pound has lost more than 40% of its value against the dollar since the beginning of the year 2022, and there is currently a shortage of foreign cash in the nation.
Egypt has experienced growing inflation in recent months, with the annual rate exceeding 18% in November. The Central Bank raised interest rates in an effort to slow the growth.
The National Bank of Egypt and Banque Misr, two of Egypt’s state-run banks, said they were selling yield saving certificates with 25 percent interest rates. Industry experts feel this is another another attempt to control inflation.
Policies that have been in place for decades force the majority of Egyptians to rely on government subsidies in order to buy essentials like bread. According to government statistics, about a third of Egypt’s 104 million people live in poverty.
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