Egyptian pound loses ground as importers' dollar demand piles up

CAIRO – 7 March 2017: The Egyptian pound dipped further Tuesday on increasing demand from importers for dollars to stock up on goods for the Islamic holy month of Ramadan, which will begin in May.

Tuesday, Banks were selling the dollar at 17.35-17.85 EGP, compared to 16-16.1 EGP last week. Meanwhile, banks were buying the dollar from clients at 17.25- 17.75 EGP.

"The local currency is expected to see further pressure during the next two months due to importers' increasing dollar demand ahead of Ramadan, which usually witnesses greater consumption," Esraa Ahmed, an economist at Mubasher International, told Egypt Today.

Another reason for the pound's recent slip is the decline in foreign investors' appetite for Egypt's treasury bills due to the pound’s appreciation last month, Ahmed added in a phone interview.

During February, the pound rebounded around 20 percent against the dollar, offsetting some of its 50 percent loss after its flotation in November.

Overseas investors' holdings of Egyptian treasury bills inched up by 11.5 billion EGP (around $630 million) in January to $1.15 billion, a sign of restoring confidence in the economy under the ambitious reform program.

Also, remittances from Egyptians abroad rose during the three months after the country's local currency flotation by 19.7 percent to hit $5 billion by the end of January.

Since November, Egypt started to implement an ambitious economic reform program, with the aim of boosting its ailing economy hit by instability and tourism decline. The authorities floated the local currency, applied a Value Added Tax (VAT) and slashed fuel subsidies.

These reforms enabled Cairo to sign a deal with the International l Monetary Fund to receive $12 billion to support its economic reform program over three years.