Cairo – Egypt’s central bank devalued the pound on Monday and said it would move to a more flexible exchange rate policy in an effort to rebalance markets.
It also will ease a foreign exchange shortage that had stifled business activity and hit confidence.
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Egypt devalued the pound to 8.85 per dollars from 7.73 and simultaneously pumped nearly 200 million dollars into the dollar-starved banking system in a surprise sale.
“The Central Bank of Egypt has decided to follow a more flexible policy with regard to the exchange rate, aiming to resolve imbalances in the exchange rate system.
“The bank will restore the circulation of foreign currency inside the banking system in an orderly way,” it said in an extensive statement.
It did not explain how the new approach would work but said it expected to rebuild foreign currency reserves to 25 billion dollars by year-end from about 16.5 billion dollars now.
Economists said the moves would encourage foreign investment in Egyptian stocks and treasuries, which have seen an exodus of foreign money in recent years.
“This is great news. You’ve made my day,” said Hany Genena, head of equity research at Beltone Financial, who had long predicted a shift to a more flexible exchange rate. (Reuters/NAN)
