The exchange rate of the US dollar recorded a slight increase against the Egyptian pound in recent transactions, gradually approaching the official market from the level of 31 pounds.
With the Central Bank of Egypt, the dollar exchange rate rose to 30.84 pounds to buy compared to 30.96 pounds to sell. At the Islamic Bank of Abu Dhabi, the dollar exchange rate rose to around £30.88 when bought, compared to about £30.93 when sold.
And at 22 banks, led by the Commercial International Bank of Egypt and Banque du Cair, the dollar exchange rate rose to around £30.85 on a buy, compared to £30.95 on a sell. The lowest exchange rate for the dollar was in 3 banks, led by the National Bank of Egypt and Bank Misr, at 30.75 pounds when buying and 30.85 pounds when selling.
On the other hand, there has been a lot of activity on the black market during recent deals with the recovery in demand for the dollar. Dealers say the dollar is locked in a price range of £34 to £35 on the parallel market, with limited and narrow transactions.
The return of the black market is due to the consistent expectations of international banks that the price of the pound against the dollar will be officially reduced.
The last of these expectations was from Societe Generale, which saw Egypt devalue the pound again in the near future.
Egypt needs a cheaper currency
The bank indicated that the pound could end the current quarter by about 10% below its current level, as Egypt needs a cheaper currency given the large current account deficit and dollar shortage.
He continued: “Although the pound has lost 50% over the past year after its triple devaluation, the currency has yet to reach a balanced short-term exchange rate.”
Recent gains have also included other currencies besides the dollar, as the European single currency recorded gains in the range of 2 to 10 piastres. At the National Bank of Egypt and Banque Misr, the euro rose to 32.40 pounds on purchases and 32.64 pounds on sales. At the Egyptian Central Bank, the euro exchange rate rose to around 32.58 pounds on purchases and 32.68 pounds on sales.
The pound rose in the National Bank and Banque Misr to around £36.38 on the buy and £36.71 on the sell. The Central Bank of Egypt reached the level of 36.64 pounds for buying and 36.77 pounds for selling.
Analysts at Societe Generale expect it to end the current quarter at $34 per dollar, compared to Friday’s price of $30.62 per dollar.
Recovery of reserves
Analysts at Societe Generale added that with the return of portfolio inflows, the central bank will need to prioritize rebuilding its foreign exchange reserves, putting further pressure on the pound.
In the Arab world, the exchange rate of the Saudi riyal rose to 8.18 pounds when buying and 8.21 pounds when selling. The UAE dirham also rose to 8.37 pounds on the buy side and 8.39 pounds on the sell side. Also, the rate of the Kuwaiti dinar rose to the level of 96.74 pounds when buying, 100.43 pounds when selling.
While the Egyptian government is moving hard on the issue of providing hard currency, the Egyptian Stock Exchange is exploring the possibility of temporarily listing four companies. Assuming the completion of the listing, the total number of companies temporarily listed on the Egyptian Stock Exchange will increase to seven. Last September, the Financial Regulatory Authority amended listing rules to allow companies to temporarily list their shares on the stock exchange for six months, provided that listing and listing requirements are met during that period.
The losses that have plagued the Egyptian pound since last year have led to a further rise in inflation. According to the Statistics Office, the annual inflation rate rose to 32.9% in February last year. However, central bank data show that the annual rate has risen to 40.3% over the past month.
Foreign investment in treasury bills
Despite the series of crises that the Egyptian economy has been facing, the data point to a $700 million, or 0.05% decline in the external debt balance at the end of September last year, to $155 billion compared to June 2022 data.
Egypt paid about $4.8 billion in debt service during the first quarter of the 2022/23 financial year, including payments of $3.2 billion in addition to $1.6 billion in interest on the debt.
At the same time, foreign investment in government treasury bills increased in December last year to around £199.5bn, up from around £160.2bn at the end of November last year, at a growth rate of around 24.5%.
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