Egyptian pound falls to record low after switch to flexible exchange rate

Egyptian pound falls to record low after switch to flexible exchange rate

The Egyptian pound fell to a record low as Cairo removed controls on its currency and switched to a flexible exchange rate system in order to unlock an IMF loan package expected to exceed $10bn.

Floating the currency and allowing market forces to set the value of the pound was a key condition for the heavily indebted country to access the IMF funds needed to avert its worst economic crisis in decades.

Egyptian state media quoted an unnamed official on Wednesday as saying that the IMF deal could be announced within hours.

The pound has been held at about 31 to the dollar for almost a year amid a crippling foreign exchange shortage, while reaching more than twice that figure on the black market.

With an inflation rate of close to 30 per cent in January, Egyptian authorities have been wary of allowing the pound to fall further and piling additional hardship on families.

But the recent move by ADQ, an Abu Dhabi investment vehicle, to inject $35bn into Egypt, the biggest single investment in the country’s history, provided the central bank with the buffer it needed to prevent the currency from going into freefall once controls had been lifted.

The pound was trading above 50