CAIRO (AP) — The Egyptian pound (EGP) slipped further against the dollar yesterday, after Egypt’s Central Bank raised its main interest rate and devalued the local currency by 14 per cent.
The moves by the Central Bank of Egypt were meant to combat inflationary waves triggered by the coronavirus pandemic and Russia’s war in Ukraine, which hiked oil prices to record highs.
Banks were selling the United States (US) currency at more than EGP18.5 while buying it at over EGP18.45. That’s up from an average of EGP15.6 for USD1 before the central bank’s decision on Monday.
The central bank increased the key interest rate by 100 basis points to reach 9.75 per cent.
The overnight deposit and lending rate were also raised by 100 basis points each to reach 9.25 per cent and 10.25 per cent respectively, the bank said.
The bank citied the war in Ukraine that has shaken the global economy and threatened food supplies and livelihoods of people across the world.
Economists have said the moves were likely signs that the government is working to secure another financing package from the International Monetary Fund (IMF).
The rising cost of basic goods has deepened the hardships facing middle class and poor Egyptians. They have suffered from price hikes since the government embarked on an ambitious reform programme in 2016 to overhaul the country’s battered economy.
The reforms were agreed on with the IMF for a USD12 billion bailout. Such economic reforms included tough austerity measures such as slashing fuel subsidies and increases in prices of everything from subway fares to utility costs.
That has taken a heavy toll on most of the country’s over 103 million population; 29.7 per cent of them live in poverty, according to official figures.
Since the war in Ukraine, residents across the country have reported rises in the price of bread, fresh vegetables and fruits and other commodities amid fears of global economic crisis.
Egypt is the world’s largest wheat importer, and most of its imports come from Russia
and Ukraine.
On Tuesday, Prime Minister Mustafa Madbouly said they were working on reconstructing the 2022-2023 budget to be prepared for “the most pessimistic scenarios”.
Authorities also established mobile markets in public squares across the country that offer food and other commodities at discounted prices.
