Egypt Vying to Lure Foreign Capital Weakens Pound to Recordby and
Egypt let its currency weaken to a record low, seeking to attract foreign capital and replenish reserves that dropped the most in almost four years during September. The black market premium to buy dollars surged.
The pound fell to 8.0301 per dollar in the official interbank market after declining by a similar amount at a central bank currency sale to local lenders. Authorities allowed the pound to depreciate for a second day, bringing its loss to 2.5 percent since last week and 11 percent in 2015, the most among Arab currencies behind Algeria’s dinar.
Egypt’s foreign reserves plunged last month due to one-time expenses such as expanding the Suez Canal, upgrading the country’s electricity grid and repaying debt to foreign oil companies, Central Bank Governor Hisham Ramez said in a televised interview Saturday. Egypt has burned through almost $6 billion of loans received from Gulf Arab allies in April, and is now seeking $3 billion from the World Bank to support its budget.
“The central bank needed to allow the pound to lose some value as a basic step toward correcting the decline in its foreign-currency base,” said Hany Farahat, a senior economist at Cairo-based CI Capital, a unit of the country’s biggest listed bank, who forecasts the pound will slide to 8.2 per dollar by year-end and 8.6 by the end of June.
The devaluation “should continue through out this week, otherwise the move would be just insignificant,” he said.
Outside the banking system, the pound tumbled to a record 8.483 per dollar, according to the average quote of seven currency dealers surveyed by Bloomberg today in Cairo, Alexandria and Aswan. That compares with 8.204 on Thursday and represents a 5.6 percent premium over the official rate, the most since January, according to the weekly surveys.