'walk the talk'

Egypt’s Catch-22: To devalue the currency or not?

By The Africa Report

Premium badge Reserved for subscribers

Posted on May 23, 2023 07:29

 © Egyptian pounds and US dollars banknotes. (Photo by Khaled DESOUKI / AFP)
Egyptian pounds and US dollars banknotes. (Photo by Khaled DESOUKI / AFP)

Egypt is facing a balancing act on whether to devalue, float or keep its pound’s exchange rate steady as the country grapples with an incessant foreign currency crisis that threatens to throw its economy further into the abyss.

The North African country is under pressure to stick to the terms of a $3bn, 46-month financial support package signed in December with the IMF, which included a commitment to shift to a flexible exchange rate regime.

However, despite three rounds of devaluations, which saw the pound lose half of its value against the US dollar since March 2022, Egypt still seems to be supporting its embattled currency amid fears that a floating currency could lead to a free fall that Egyptians can hardly bear.

Possibility to avoid further devaluation?

Egypt’s resources to avert a further slide in the pound’s value look thin as it struggles to generate much-needed foreign currency, with the impact of the Russian-Ukrainian war taking its toll.

Remittances by foreign-based Egyptians, one of the country’s main sources of hard currency, fell to $12bn in the second half of last year; a 22.6% decrease compared

There's more to this story

Get unlimited access to our exclusive journalism and features today. Our award-winning team of correspondents and editors report from over 54 African countries, from Cape Town to Cairo, from Abidjan to Abuja to Addis Ababa. Africa. Unlocked.

Subscribe Now

cancel anytime