Egypt’s Pound Slides as IMF Deal Triggers New Exchange Rate

Egypt’s Pound Slides as IMF Deal Triggers New Exchange Rate

Egypt's pound slid about 14.5% to a record low against the dollar on Thursday as authorities announced a $3 billion International Monetary Fund deal with a commitment to a "durably flexible exchange rate regime".

The central bank also raised interest rates by 200 basis points in an out-of-cycle meeting, saying it aimed to anchor inflation expectations and contain demand-side pressures.

Egypt had been in talks with the IMF for a new loan since March. The fund has long been urging Egypt to allow greater exchange rate flexibility.

In a statement confirming a staff-level agreement on a $3 billion, 46-month Extended Fund Facility, the IMF said a flexible exchange rate regime should be "a cornerstone policy for rebuilding and safeguarding Egypt's external resilience over the long term".

It said the deal was expected to catalyze a large, multi-year financing package, including about $5 billion in the fiscal year ending June 2023, reflecting "broad international and regional support for Egypt".

Egypt's central bank said it was intent on intensifying economic reforms and had "moved to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the EGP against other foreign currencies".

The pound weakened rapidly to around 23 to the