Egypt's pound flops on black market amid exchange crackdown

AP News
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Posted: Apr 21, 2016 12:25 PM

CAIRO (AP) — Egypt's currency fell to new lows on the black market this week, with traders selling it on Thursday from between 11 and 11.15 Egyptian pounds to the dollar amid speculation it will be officially devalued further.

Newspaper headlines said it had fallen to a level as weak as 11.50 against the dollar the previous day, while some exchange bureaus put it closer to the official level of 8.88. The Associated Press noted the 11 to 11.15 range at three different currency traders.

"Rumors have circulated on the market suggesting the central bank would devalue the pound, but we consider this move as having a low probability," said Mohamed Abu Basha from EFG-Hermes bank.

"The county needs to find ways to attract sustainable sources of foreign exchange income," he said. "We think the best chance for that is signing a deal with the International Monetary Fund — that would bring in different sources of funding and help boost investor confidence," he added.

The pound was last devalued officially from 7.73 to the dollar in mid-March.

Central bank Gov. Tarek Amer has blamed the trend on speculation and rumors by people "seeking to harm the country." He denied to the state MENA news agency the bank planned a further devaluation.

Foreign currency has been scarce for importers, and authorities have been cracking down on black market dealers.

Many Egyptians are worried that devaluation steps will cause a surge in prices, especially given that Egypt imports a multitude of goods ranging from raw materials to cooking oil. That would add to the strain of an underperforming economy that has yet to recover from years of turmoil since the 2011 ouster of longtime autocrat Hosni Mubarak.

A deal with the IMF would also require increasing revenues and cutting public spending, either by further subsidy cuts or sales tax increases, moves that could generate popular resentment against President Abdel-Fattah el-Sissi's government.