Egypt Devalues its Currency for the Fourth Time in Two Years
Following the CBE's announcement, the Egyptian pound hit a fresh low record against the US dollar, recording EGP 45 on March 6th.
Egypt devalued its currency for the fourth time since 2022, following a record-high interest rate hike by the Central Bank. The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) increased the interest rates by 600 basis points (bps) at its special meeting on March 6th, The CBE released a statement on Wednesday.[1]
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Accordingly, the overnight deposit rate and the overnight lending rate rose to 27.25% and 28.25%, respectively.
Also, the rate of the main operation increased to 27.75%, and the discount rate went up to 27.75%.
The move is being taken to "stabilize the local economy," "reduce the soaring pressures of inflation," and address the scarcity of foreign exchange, the CBE said.
Price stability and long-term economic growth are priorities that the CBE has reiterated. By moving to a flexible inflation-targeting framework, the CBE will facilitate the elimination of foreign exchange backlogs by letting market forces determine the exchange rate.
The CBE gives pricing stability a priority to promote long-term economic growth, even if it acknowledges possible short-term effects on the growth of private sector credit. According to the CBE, these steps, which are components of comprehensive economic reforms, have the backing of both bilateral and multilateral partners, guaranteeing sufficient foreign exchange liquidity and debt sustainability.
To preserve a balance between price stability and economic growth, the MPC said it will continue to monitor economic indicators and maintain a restrictive monetary policy until inflation is firmly anchored.
Following the CBE's announcement, the Egyptian pound hit a fresh low record against the US dollar, recording EGP 45 on March 6th.