PM says Egypt ‘will not repeat past mistakes’ on exchange regime as pound exceeds 49.5 per $1

CAIRO – 30 November 2024: In light of a slight uptick in the official exchange rate of the Egyptian pound against the US dollar in recent weeks, Prime Minister Mostafa Madbouly has emphasized Egypt's determination to avoid “previous mistakes” by steering clear of a fixed exchange rate regime.

Addressing the nation in televised statements on Saturday, Madbouly remarked on the long-held perception within Egypt that a fixed exchange rate symbolized a state's robustness and endurance and that a flexible exchange rate system should be avoided.

"We used to adhere to a static exchange rate until a problem arises that necessitates a significant floating [of local currency] with substantial fluctuation of 30% to 40% in the currency's value," Madbouly said.

The premier highlighted Egypt's adoption of a market-driven exchange rate mechanism since March of this year, noting a recent 4-5% decline in the Egyptian pound's value against the dollar, with rates climbing from LE 47 to LE 49 per $1.

Madbouly underlined the potential for both a decrease and an increase in the exchange rate by equivalent margins, indicating that fluctuations could see the dollar's value drop to LE 46-47 or rise by the same percentage.

Emphasizing the counsel of economists, Madbouly underscored the criticality of avoiding past errors and maintaining a flexible exchange rate framework to instill confidence in the markets, fostering favorable conditions for investors and the private sector.

The prime minister reaffirmed that the flexible exchange rate instills confidence among investors, enabling long-term strategic planning for investments in Egypt's market for the next 15 to 20 years.

Madbouly stressed that a flexible exchange rate bolsters a conducive investment climate and fortifies the economy's resilience.

Egypt’s PM Mostafa Madbouly addresses the nation in televised statements after touring several health institutions in Cairo and Giza, 30 Nov. 2024 - Cabinet

Egypt remains steadfast in upholding a flexible exchange rate policy under the $8 billion Extended Fund Facility (EFF) loan program in collaboration with the International Monetary Fund (IMF), a commitment initiated in December 2022 and reinforced in March 2024.

According to the latest data from the Central Bank of Egypt (CBE), closing foreign exchange rates stood at LE 49.52/$1 for purchasing and LE 49.66/$1 for selling as of Thursday, 28 November.

Over the past two years, the Egyptian pound has undergone a depreciation of around 40-50% against the US dollar.

The recent fluctuations in exchange rates coincide with discussions between Egypt and the IMF to evaluate the country's IMF-supported reform program, with IMF Managing Director Kristalina Georgieva hinting at potential revisions to certain aspects of the economic agenda.

One of the focal points in the forthcoming dialogues between IMF representatives and Egyptian officials will likely revolve around the flexible exchange rate policy, a cornerstone of the IMF agreement.