(AFP Photo)
By Hossam Mounier
The Central Bank of Egypt (CBE) continued on Sunday to decrease the value of the Egyptian pound against the US dollar by 10 more piasters. The value of the Egyptian pound against the US dollar is now EGP 7.73 at the CBE and EGP 7.83 at banks.
This is the second step of its type in four days, including Friday and Saturday, the official holiday of the bank, with the CBE having raised the dollar price by 10 piasters, last Thursday.
Talking to Daily News Egypt, a prominent banker, who requested anonymity, said the CBE is intentionally decreasing the pound’s value to meet International Monetary Fund (IMF) requirements. The IMF believes the value of the Egyptian pound against the dollar is over its real level.
The source added that the exchange rate policy followed by the CBE was always a point of controversy with the IMF, which was continually demanding a full liberation of the exchange rate in Egypt.
He said the government may want to reach an agreement with the IMF to obtain a loan or a certificate for the Egyptian economy. Therefore, it had no option other than to implement its requirements related to the exchange rate, and making the value of the Egyptian pound reach the price it deems acceptable.
According to the banker, the CBE will have to increase the interest rates on the pound soon, to face the expected inflation increase after raising the dollar price. This increase is expected to lead to significant increases in the commodities’ prices in the markets.
The Monetary Policy Committee, responsible for deciding the interest rates at the CBE, will meet on 30 July. The committee was keen during its last three meetings to leave the interest rate at 8.75% for deposits and 9.75% for overnight lending, after decreasing them on 15 January by 0.5%. This was aimed at supporting the economic growth. A lot of analysts believe that the committee may give up on stabilising the interest rate, and tend to increase it in its next meeting.
The CBE has increased the dollar against the pound for the first time in 2015 on 18 January, where the exchange rate against the US currency was raised by 5 piasters, registering EGP 7.23. The EGP 7.83 that the dollar registered Sunday is the highest price ever for the dollar in the official market, while the dollar has exceeded that level in the unofficial market before.
