Recently, the Egyptian Pound was the most valuable currency on the African continent. Its value against the greenback has fallen to a new record. The pound’s fall came amidst reports suggesting the Egyptian government is hoping to strike a loan deal with the International Monetary Fund (IMF) within a month or two.
The Egyptian Pound is still overvalued
After falling to 19.6736 per greenback, the Egyptian pound became the latest African currency that has fallen to record levels versus the U.S. dollars. Before this, the currency’s previous record low exchange rate of 19.6725 per dollar was last seen in December 2016.
The Nigerian currency is another African currency that has struggled with the U.S. dollar in 2022. It recently reached a record low of 735 Nigerian naira per dollar. In September, Bitcoin.com News reported that the gap between the Ethiopian birr’s official and parallel market exchange rate had grown to a new record high. This year, the South African rand and Ghanaian cedi have both declined significantly in comparison to the U.S. dollars.
According to a Bloomberg report, the pound’s depreciation came as Egypt is getting closer to securing a loan from the International Monetary Fund (IMF). Egypt will benefit from the IMF loan and the $22 million pledged by the rich Gulf states to support it in its efforts to deal with food and energy shocks caused by the Ukraine-Russian military conflict.
The IMF will ask Egypt to change the exchange rate before it approves the loan. This is similar to what happened in 2016. In 2016, the IMF demanded that Egypt adjust its exchange rate to get a $12 billion loan.
Flexibility in Exchange Rate
In addition to demanding the pound’s devaluation, the IMF reportedly requested the Egyptian government take steps which eventually made the North African country a less appealing investment destination.
According to the report, the Egyptian government is likely to accede to the IMF’s demands for a more flexible exchange rate. The date for the approval of the loan package has not been announced. However, Mohamed Maait, Egypt’s finance minister revealed that his government had hoped to have an agreement with the international lender in the next few months.
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