Egypt Amid Foreign Exchange Crisis, Raises Benchmark Interest Rate by 6 Percentage Points Abruptly

In Commitment to Exchange Rate Flexibility
Pound Sterling Value to Be Left to the Market

Amid Egypt's foreign exchange crisis, the Central Bank of Egypt (CBE) held an unscheduled special monetary policy meeting on the 6th (local time) and abruptly raised the benchmark interest rate by 6 percentage points to 27.25%.

The CBE explained in a statement that it had decided to accelerate the monetary tightening process to promote disinflation (slowing inflation) early and to ease underlying inflation.

The CBE also announced that, as part of fulfilling its commitment to liberalize the exchange rate, it would allow the value of the Egyptian pound to be fully determined by the market. This is interpreted as a measure to curb the surge in the exchange rate caused by foreign currency shortages and the annual inflation rate exceeding 30%.

Since the COVID-19 pandemic, Egypt has suffered from foreign currency shortages, with inflation rates exceeding 30% annually. Recently, the exchange rate temporarily surged to around 70 pounds per US dollar in the black market.

However, it is uncertain whether the exchange rate will stabilize smoothly after this measure as dollar circulation proceeds. Farouk Soussa, an economist at Goldman Sachs, said, "We need to observe at what level the exchange rate will stabilize," and added, "We expect it to be around 45 to 50 pounds per dollar."

This content was produced with the assistance of AI translation services.