Egyptian Currency Plunges 15% After Cairo Accedes to Key IMF Exchange Rate Condition – Emerging Markets Bitcoin News

The pound’s exchange rate against the U.S. dollar fell to 23.09-1 after Egyptian authorities announced the establishment of an easier exchange rate system. This was a record low for the currency. Cairo’s apparent devaluation of the Egyptian pound met a key condition set by the International Monetary Fund (IMF) before it eventually approved a $3 billion bailout package for Egypt.

The IMF’s Key Condition

According to a report, the exchange rate between the Egyptian pound and the U.S. dollar plummeted by 15% to 23.09 dollars after the central bank adopted a flexible rate regime. Cairo’s apparent devaluation of the currency came as news broke that Egypt had reached an agreement with the International Monetary Fund (IMF) which will see it receive a $3 billion financial bailout.

Before the pound’s latest slip, the currency had traded at just under 20 units per dollar. Some Egyptian banks, along with the IMF, claimed that the March adjusted exchange rate overvalued the currency. The pound-versus dollar exchange rate was unchanged for approximately two years before that.

As previously reported by Bitcoin.com News, Egypt’s chances of securing a bailout from the international financial institution had hinged on it abandoning the fixed exchange rate regime. The report notes that the IMF demanded the same thing from Egypt before it approved its $12 billion loan package in 2016.

Support From Egypt’s Allies in Gulf Cooperation Council

Egypt has also agreed to a $3 billion loan package and will be receiving $5 billion in aid from its so-called international partner. Bloomberg quotes unnamed officials as saying that the extra funding will be used to assist Egypt in covering its foreign financing gap. Egypt has also requested $1 billion from the IMF’s newly created sustainability fund.

Although Egypt’s latest loan agreement with IMF has not matched expectations, one analyst with the London-based Columbia Threadneedle Investments, Gordon Bowers, said this likely paves the way for the country’s rich allies to step in. He added:

[It]Seems like an extra GCC [Gulf Cooperation Council]Support was conditional on IMF participation. This is a good thing.

Reports suggest Egypt’s GCC allies have pledged over $20 billion in aid, which is expected to come in the form of deposits and investments.

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Terence Zimwara

Terence Zimwara, a Zimbabwean journalist, writer and author who has been awarded the Zimbabwe Booker Prize. He is a prolific writer on the economic woes of African countries, as well as digital currencies that can be used to provide an escape path for Africans.