CAIRO — The
Egyptian pound plunged nearly 17 percent in value against the
US dollar on
Monday, following a rise in inflation and amid mounting economic hardships.
اضافة اعلان
The local currency
in the
Arab world’s most populous country already saw a sharp devaluation in
2016 when it lost nearly half its value against the dollar overnight.
The pound was
floated at the time as part of a package of reforms in exchange for a
$12-billion bailout from the
International Monetary Fund.
The pound was
trading at 18.20 to the dollar by closing time at banks on Monday, from 15.70
the previous day, according to the central bank.
The finance
ministry announced it will maintain the customs exchange rate at 16 pounds to
the dollar, as the local currency continued its freefall.
The ministry also
announced a package of measures worth about $7 billion to shield society’s most
vulnerable against shocks in the market.
The latest
depreciation comes as global food supply chains have been dealt a major blow by
Russia’s invasion of Ukraine.
As the world’s
largest importer of wheat, Egypt relies on both countries for 85 percent of its
supplies of the staple, as well as 73 percent of its sunflower oil, for which
Ukraine is world leader.
Investment bank JP
Morgan recently estimated the Egyptian pound to be overvalued by about 15
percent.
Inflation in the North African country stood at 10
percent in February, according to the country’s statistics agency, reaching an
almost three-year high and driven by a 20-percent increase in food prices.
The
World Bank has
warned that a 30-percent rise in food prices could result in a 12-percent
increase in poverty rates, already hovering at about a third of Egypt’s 103
million-strong population.
Rising prices have
prompted authorities to impose a tariff on unsubsidized bread for the first
time.
The Central Bank of
Egypt on Monday announced a rise in key interest rates of one percentage point
at an emergency meeting, in a bid to tackle inflation.
The overnight
deposit rate increased to 9.25 percent and the overnight lending rate to 10.25
percent, while the main operation rate was set at 9.75 percent.
Egypt is bogged
down by a sizeable foreign debt bill that constitutes almost 90 percent of GDP.
Egypt has embarked
on fiscal reforms and sought to overhaul the taxation regime, but it has
struggled to control the informal sector, which constitutes a large portion of
the economy.
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