Egypt's currency halves in value in 10 months

CAIRO, Jan. 11 (Xinhua) -- The Egyptian pound further declined against the U.S. dollar on Wednesday, plunging to below 31 pounds to the dollar before settling at 29.7 in the afternoon.

The Egyptian local currency has lost about half of its value since March 2022, when a dollar was worth about 15.7 pounds.

Egypt devalued its local currency twice in 2022, the latest of which was in late October.

The devaluation is part of the country's "shift to a durable exchange rate regime" demanded by the International Monetary Fund (IMF), which has recently approved a loan of 3 billion dollars to Egypt to finance its economic and structural reforms.

Over the past year, Egypt has been facing soaring inflation driven by the global hike in food and energy prices.

Egyptian annual urban consumer inflation rose to 21.3 percent in December compared to 18.7 percent in November, marking the highest since late 2017, as data from Egypt's official statistics agency CAPMAS showed on Tuesday.

Also in December, the Central Bank of Egypt (CBE) announced raising the interest rate by 300 basis points to contain high inflation, increasing the deposit rate to 16.25 percent and the lending rate to 17.25 percent.

Raising interest rates aimed "to contain inflationary pressures and to steer annual headline inflation rates towards its upcoming targeted levels," the CBE explained then.

Last week, Egypt's two major banks, Banque Misr and the National Bank of Egypt, offered certificates for one-year savings with a record-high 25-percent interest rate, a move that usually signals a devaluation of the local currency.

Egyptian economist El-Sayed Kheder said the hike of the dollar against the pound was "expected," due to the country's shortage of foreign currency inflows as repercussions of the ongoing Russia-Ukraine conflict and the lingering COVID-19 pandemic.

"The central bank has embarked on precautionary measures in an attempt to save the Egyptian pound in the coming period, while issuing savings certificates with a 25-percent annual interest rate with the aim of collecting cash from the market and combating inflation," the expert told Xinhua.

He predicted that the dollar hike in Egypt "would not last for long," and that the exchange market in the country would soon restore its balance and stability.