The Egyptian pound recently became the latest currency on the African continent to see its value against the greenback fall to an all-time low. The pound’s fall came amid reports suggesting the Egyptian government hopes to strike a loan deal with the International Monetary Fund (IMF) within a month or two.
The Egyptian pound still overvalued
The Egyptian pound became the latest African currency to depreciate to a record high against the US dollar, after slipping to an exchange rate of 19.6736 for every greenback on October 4. Before that, the currency’s previous all-time high exchange rate of 19.6725 per dollar was last seen in December 2016.
Other African currencies that struggled against the US dollar in 2022 include the Nigerian currency, which recently hit a new all-time low of 735 naira for every dollar. In September, Bitcoin.com News reported that the difference between the official exchange rate of the Ethiopian birr and that of the parallel market had reached a new high. The Ghana cedi and South African rand have also depreciated sharply against the US dollar this year.
According to a Bloomberg report, the pound’s depreciation came as Egypt moved closer to securing a loan from the International Monetary Fund (IMF). The IMF loan, along with the $22 billion pledged by wealthy Gulf states, is expected to help Egypt deal with energy and food shocks resulting from the military conflict between Ukraine and Russia.
However, before approving the loan, the IMF will likely ask Egypt to adjust the exchange rate as it did in 2016. At that time, the global lender insisted that the pound should be devalued before the Egyptian government could access a $12 billion loan.
A more flexible exchange rate
In addition to demanding the devaluation of the pound, the IMF reportedly called on the Egyptian government to take action that ultimately made the North African country a less attractive investment destination.
According to the report, the Egyptian government is likely to accede to IMF demands for a more flexible exchange rate. Although no date was given for when the loan package was likely to be approved, Egyptian Finance Minister Mohamed Maait reportedly revealed in September that his government hoped to reach an agreement with the global lender by a month. month or two.
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