Foreign Currency

Devaluation of LE could persuade USD holders to deposit FX into banks to close rate gap



Cairo – January 22, 2024: Head of the Planning and Budget Committee in the House of Representatives, Fakhry El-Fiqi, believes that a potential devaluation of the LE could incentivize holders of the US dollar to deposit their savings in banks to support closing the gap between the official and black market rates.


In a phone-in interview, El-Fiqi stated that Egypt is contemplating the devaluation of the Egyptian pound to narrow the gap between the official exchange and black market rates.


The committee head stressed that certain requirements must be met prior to any devaluation or currency adjustment, emphasizing the need for a sustained decline in inflation rates.


Officially, the Egyptian pound is trading at LE 30.96 per USD, while black market prices have risen to around LE 60.


“Inflation should fall below 25 percent within the next six months,” stated El-Fiqi during a phone in interview.


Among the prerequisites for devaluation, El-Fiqi stressed that the Central Bank of Egypt should adopt a tighter monetary policy and absorb the LE 500 billion liquidity following the maturity of certificates of deposit issued by the National Bank of Egypt (NBE) and Banque Misr in January 2023.


The committee head emphasized the importance of ensuring a sufficient amount of foreign currency to facilitate documentary credits for importers, which is estimated at $5 billion.


El-Fiqi highlighted the International Monetary Fund’s role in providing additional FX through the $3 billion loan program, of which he expects could expand, stating “the precise amount of the increase is uncertain, but there are indications that the loan could reach $6 billion or exceed this figure.”


 



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