Egypt’s Central Bank has devalued their local currency from 8.85 Egyptian pounds to the dollar to roughly 13 Egyptian pounds to the US greenback in an effort to flush out the black market, on Thursday.
According to the central bank, which is responsible for setting Egypt’s monetary policy, foreign currency prices will henceforth be determined by local market supply and demand.
“It is going to take us around a year and a half to see changes,” Tarek Amer, the head of the central bank said at a news conference. “We are just fixing the foundations.”
International Monetary Fund Director Christine Lagarde has repeatedly called on Egypt’s financial authorities to devalue the Egyptian pound - long considered overvalued - so as to qualify for a requested $12-billion IMF loan.
By the end of October, the dollar was trading for as much as 18 pounds on Egypt’s black currency markets - the weakest exchange rate in the country’s history.
Egypt’s black market for dollars has flourished since the 2011 uprising that saw the fall of President Hosni Mubarak’s 30 year rule, scaring away tourists and foreign investors, a country’s major sources of foreign currency.
This has not carried through to the real value of the Egyptian pound that has been falling on the black market since the uprising that scared away tourists and foreign investors.
Since then, the Egyptian pound has continued to fall due to acute hard-currency shortages in the local market, along with recent declines in tourism, foreign investment and exports due largely to ongoing political turmoil.