The Egyptian pound recently became the latest of the African continent’s currencies to fall to a record low in value against the dollar. The pound fell following reports that the Egyptian government hopes to sign a loan agreement with the International Monetary Fund (IMF) within a month or two.
The Egyptian pound is still overvalued
The Egyptian pound fell to an exchange rate of 1 greenback = 19.6736 on October 4, becoming the latest African currency to fall to a record low against the US dollar. Prior to this, the currency’s previous record low exchange rate of 19.6725 to the dollar was last seen in December 2016.
Other African currencies that have struggled against the U.S. dollar in 2022 include the Nigerian currency, which recently hit an all-time low of 735 naira to the dollar.In September, Bitcoin.com News reported that the difference between the official exchange rate of the Ethiopian bill and the parallel market exchange rate had reached an all-time widened to its highest level, it reported. The Ghanaian cedi and South African rand have also depreciated significantly against the U.S. dollar this year.
according to a Bloomberg report. The pound weakened as Egypt moved closer to securing a loan from the International Monetary Fund (IMF), which, like the $22 billion pledged by wealthy Gulf states, is expected to help Egypt cope with energy and food shocks stemming from the military conflict between Ukraine and Russia.
Before approving the loan, however, the IMF will likely require Egypt to adjust its exchange rate, much as it did in 2016. At the time, the global lender insisted that the Egyptian government must devalue the pound before it could take advantage of the $12 billion loan package.
More flexible exchange rates
In addition to demanding a devaluation of the pound, the IMF reportedly demanded that the Egyptian government take steps that would ultimately make the North African country less attractive as an investment destination.
According to the report, the Egyptian government is likely to accept the IMF’s request for exchange rate flexibility. No timeline has been given for when the loan package is likely to be approved, but Egyptian Finance Minister Mohamed Maait reportedly revealed in September that the country’s government hopes to reach an agreement with global lenders within one to two months.
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