The Egyptian pound devalued by 13%, according to Financial Times. This follows from the results of the interbank foreign exchange auction in which the country’s Central Bank sold $200 million at the rate of 8.85 pounds per dollar, the newspaper said citing an informed source. Previous selling rate was 7,73 lbs for a dollar.
The devaluation made to reach “the exchange rate, which reflects the strength and real value of the national currency in the short term”, said in a statement the regulator released on Monday, the content of which leads Bloomberg.
The Central Bank explains that a depreciating pound should increase foreign investment and help to cope with the shortage of dollars, which threatens economic growth. Since 2011, the foreign currency reserves of Egypt decreased by 50%, and their size in the last six months has stabilized at the level of $16 billion In the Central Bank report stated that by the end of 2016, reserves will increase to $25 billion.
Chief economist for Central and Eastern Europe, the Middle East and North Africa at HSBC Holdings Simon Williams said that Egypt would save billions of its reserves, if devalued the pound a year and a half ago. He added that at issue is the determination of the authorities to accept the inflation that will inevitably result in the devaluation.
The FT recalls that the explosion of the plane with the Russian tourists has led to a sharp drop in the number of foreign tourists, which exacerbated the already existing shortage of currency. The decline in investment has delivered in a challenging environment, the Egyptian business and called the threat of disruption of import supplies of essential commodities, including medicines, says the publication.
In early November, Russia banned the aviation and tourism a message from Egypt and brought from that country to all its tourists. State Duma speaker Sergei Naryshkin at the end of January, admitted that the security of Russians in Egypt can be solved in the near future.
The Kazakh authorities also encouraged its companies to restrict flights to Egypt. At the end of February at the Ministry for investment and development of the country published a message about the restoration of air communication with Egypt since March.