Egypt’s Local Currency Float Attracts Billions of Dollars Inflow, But Inflation Jumps - Africa’s premier report on the oil, gas and energy landscape.

Egypt’s Local Currency Float Attracts Billions of Dollars Inflow, But Inflation Jumps

By Toyin Akinosho, Publisher

The Egyptian government expects close to $30Billion from external investors to flow into the country before end of 2024, as a result of the central bank floating the Egyptian Pound () on March 6, 2024, among other measures.

The country’s Ministry of Finance reportedly declares that over $3Billion has come into the country since the float, and there is the expanded $8Billion deal secured with the International Monetary Fund (IMF), hours after the CBE floated the currency and delivered a 600 basis points rate hike.

Additionally, Egypt wILL obtain a $1.2Billion loan for environmental sustainability, bringing its total from the IMF to more than $9Billion, the government said.

The currency weakened to beyond 50 to the dollar, a historic plunge, from about 30.85, a level Egypt has for months tried to defend. It closed at 49.4 to the dollar on the day of float.

This means a further rise in inflation, even higher than the skyrocketing numbers currently being experienced by Egyptian consumers. The annual urban consumer price inflation, measured for February 2024, leapt to 35.7%, “the biggest sequential pace on record; jumping by 11.4% month-on-month from 1.6% in January, far outstripping economists’ projections”, Reuters reported. That measurement, from CAPMAS, the statistics agency, does not yet account for what is expected in the weeks after the currency devaluation.

But support is coming. The World Bank has now approved a $6Billion financing package over the next three years, according to separate statements by the bank as well as Egypt’s Ministry of International Cooperation. Approval for the package, by the board of the World Bank group, is expected before the end of the second quarter 2024.

The World Bank’s $6Billion funding is meant for the following:

$3Billion will go to the government to support its economic and structural reforms, social protection programmes, and its green economy transition.

$3Billion will be distributed through the group’s private sector arm, the International Finance Corporation (IFC), and will go to the private sector. The funding will be delivered in the form of equity and loans made up partly by investor funds.

A flexible exchange rate by Egypt had long been demanded by the IMF as crucial for restoring investor confidence in North Africa’s largest economy and the Arab world’s most populated country.

Egypt’s Central Bank governor Hassan Abdalla told the press on March 15, 2024, that demand for the US Dollar was is on the decline on account of a better supply of the hard currency in banks and a faster release of goods stuck at ports.

Al Borsa, the country’s financial daily, reported March 16, over 2.3Billion worth of foreign currency have been sold since the March 6, 2024 float at the National Bank of Egypt’s foreign currency exchange bureau’s Al Ahly Exchange, Banque Misr’s Misr Exchange, and Banque du Caire’s Cairo Exchange

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