Following the Central Bank of Egypt’s (CBE) decision to liberalize the exchange rate on Wednesday, March 6, banks and exchange offices across Egypt have reported significant inflows of US dollars and other major foreign currencies.
Consequently, the US dollar’s price has seen a marked decrease, averaging a drop of EGP 1.7 from its highest point on the day the flotation was announced.
On the first day of the exchange rate liberalization, the dollar closed at EGP 49.4743 for buying and EGP 49.5743 for selling in banks. Its peak price that day was EGP 50.75 for buying and EGP 50.85 for selling.
By last Thursday, the dollar’s trading concluded at EGP 47.7783 for buying and EGP 47.8769 for selling, a decrease from EGP 48.364 for buying and EGP 48.464 for selling earlier in the day, with the day’s highest price reaching EGP 48.52 for buying and EGP 48.62 for selling.
Mohamed El-Etreby, Chairperson of the Federation of Egyptian Banks (FEB) and Chairperson of Banque Misr, noted a surge in financial transfers to Egypt in various foreign currencies, from both Egyptians living abroad and foreign investors interested in local treasury bills and bonds. This influx is a positive sign of renewed confidence in the Egyptian economy, bolstered by the unveiling of the Ras Al-Hekma deal and the CBE’s decisive actions to increase exchange rate flexibility, control inflation, and set it on a downward trajectory.
El-Etreby highlighted in his statement that transfers from Egyptians abroad to Banque Misr have increased more than tenfold, and dollar transfers within the bank’s exchange company have surged about twentyfold since the previous period.
He further stated that the robust foreign exchange inflows have strengthened the Egyptian pound against the US dollar in recent days. With expectations of continued growth in market inflows and the official waiver of the dollar, significant funding from the IMF, the EU, and the World Bank is anticipated, along with the second installment of the $20bn Ras Al-Hekma deal.
Al-Ahly Exchange and Misr Exchange reported collecting over EGP 2.214bn in Arab and foreign currency proceeds since the exchange rate liberalization decision until the close of business last Friday.
Abdel Megeed Mohi El-Din, President of Al-Ahly Exchange, confirmed that the company has attracted EGP 1.287bn in proceeds since the CBE’s decision, with a continuous increase in inflows.
Adel Fawzi, Chairperson of Misr Exchange, stated that the company’s foreign currency proceeds since the exchange rate liberalization have surpassed EGP 927m.
He detailed that the US dollar comprises the largest portion of these proceeds at 65%, followed by the euro at 18%, the Saudi riyal at 13%, the British pound at 2%, the UAE dirham at 1%, and the remaining currencies collectively at 1%.
CBE decided in a special meeting on Wednesday to let the exchange rate float according to market dynamics. It emphasized that harmonizing the exchange rate is essential, as it helps to prevent the buildup of foreign exchange demand by bridging the gap between the official and parallel market rates.
Hassan Abdallah, the CBE Governor, stated in a press briefing that the CBE has no intention of pegging the dollar to a fixed rate.
He noted that banks have started to provide ample dollars for import transactions. He also assured that Egypt currently possesses sufficient foreign reserves to fulfill its financial commitments and more.
“We are committed to satisfying all dollar demands promptly, and we have the resources to do so,” he added.
Prime Minister Mostafa Madbouly, in the latest Cabinet session, highlighted several optimistic signs, particularly the steady recovery of remittances from Egyptians overseas, coinciding with the black market’s downturn.
He observed that banks and currency exchanges are now attracting numerous customers exchanging dollars for Egyptian pounds.
Madbouly mentioned that a significant volume of goods held at ports has been cleared, with the CBE Governor confirming the recent clearance of goods valued at approximately $3bn.
He also relayed that Ahmed Eissa, the Minister of Tourism and Antiquities, reported a surge in dollar transactions by tourism firms with the banking sector, alongside an increase in Egyptian pound receipts.
Hisham Ezz El-Arab, the CIB Chairperson, remarked, “A week into the exchange rate liberalization, it’s evident we’re on the correct trajectory, assuming liquidity remains accessible for transactions. The dollar’s value will naturally fluctuate based on market forces. Discussing its precise value at this stage is premature.”
Ezz Al-Arab further commented, “We’ve embarked on a reform journey that has started well, yet it’s just the beginning.”
He concluded, “Now is the opportune moment for asset monetization, public debt reduction, and settling the CBE’s overdrafts.”
