The Egyptian Pound March 2024 ‘s devaluation in March: A new level of challenges

This is the first true Egypt-centric post after weeks of covering the Gaza war. “I will continue covering this war, this post is exceptional.”

In case you do not know the Central Bank of Egypt’s Monetary Policy Committee “MPC”, in an extraordinary meeting, decided on Wednesday to increase the deposit and lending rates for overnight and the main operation rate of the Central Bank by 600 basis points, reaching 27.25 %, 28.25 %, and 27.75%, respectively.

Additionally, credit and discount rates were raised by 600 basis points to reach 27.75 %.

As a result of this decision, the Egyptian pound experienced a significant drop on Wednesday, declining by 6.2 % to approximately LE 50.1 against the US dollar and LE 54.5 against the euro.

Following the announcement by the Central Bank of Egypt (CBE), the Egyptian government revealed that it had signed an agreement with the International Monetary Fund (IMF) to extend the current $3 billion loan deal to $8 billion.

According to the officials, these measures “which are actually a main condition to get the IMF loan” are needed to curb the inflation and the foreign currency black market as we used to have two US dollar prices.

The IMF has wanted the Egyptian government to fully devalue the Egyptian pound, sell assets and privatize the public sector for real.

FYI, we are the biggest IMF customer after Argentina and this may give you a hint of how things are.

It's widely known that Egypt has been grappling with one of the most severe economic crises it has faced since the 19th-century economic downturn.

This graph by Al Mal financial newspapers shows the trip of the Egyptian Pound from LE 7 in 2016 to the abyss in 2024. 

بعد قرار البنك المركزي اليوم.. رحلة تحرك سعر الدولار أمام الجنيه خلال 9 سنوات pic.twitter.com/i1V4qRIgF9

— جريدة المال (@AlMalWeb) March 6, 2024

Egypt has already received billions in dollars in the past 2 weeks from the Gulf countries, mainly UAE “the biggest foreign investor in Egypt now” and Saudi Arabia as investments or more of a bailout seriously speaking.

The government asserts and promises that new policies will be implemented, ensuring that past mistakes are not repeated. Some are hopeful that if President Abdel Fattah El-Sisi is sworn in for a third term next April, a new government with a fresh economic team will be established.

Yet, we have been hearing about this new government for two months now with the name of Hala El-Saeed, the current Minister of Planning is tipped to be the next Prime Minister.

El-Saaed may become the first woman to become Egypt’s PM but honestly speaking, I do not care about women's empowerment history-making at this stage. I care more about-solve-economic-crisis -with-less-losses-history-making honestly. 

We do not know what is going to happen, but I know that the government believes it can solve many of the economic problems related to industry, imports and exports in the upcoming weeks after this huge devaluation. It believes that it can push down inflation in March.

This happens at the same time we have got two direct wars affecting us on our borders whether in the South as the war between the two generals has not stopped yet. Ramadan is days away and there is no ceasefire in Gaza.

It is like hard times by all measures.

Some foreign economic analysts say that this is not the only devaluation Egypt will have but time will tell.