RIYADH: Egypt’s pound depreciated by almost 14 percent on Monday after weeks of pressure on the currency as foreign investors pulled out billions of dollars from Egyptian treasury markets following Russia’s invasion of Ukraine.
The pound dropped to 18.17-18.27 against the dollar, Refinitiv data showed, after having traded at around 15.7 pounds to the dollar since November 2020.
Egypt has been in discussions with the International Monetary Fund about possible assistance, people close to the negotiations have said, but it has not announced any formal request.
It also coincided with a decline in tourism revenue, which resulted in foreign investors withdrawing billions of dollars from Egypt's money market, Reuters reported.
In a surprise monetary policy meeting, the Central Bank of Egypt has also raised interest rates by 100 basis points.
The monetary policy committee had been scheduled to meet on March 24.
The IMF in Cairo was not immediately available for comment.
Monday’s weakening of the pound could catalyze inflows of foreign currency, while investors who already had money in Egyptian treasuries would be unlikely to sell now, said Farouk Soussa, senior economist at Goldman Sachs.
HIGHER WHEAT IMPORT PRICES
Shortages of dollars have led to blockages at Egyptian ports, after importers could not obtain necessary foreign currency for letters of credit to get their goods cleared, bankers said.
The war in Ukraine has also left Egypt facing higher costs for its substantial wheat import needs as well as a loss in tourism revenue from Russian and Ukrainian visitors to Red Sea resorts.
(With Reuters)
