Banking experts demanded that exchange rate shall be determined by supply and demand factors instead of being backed by the government. Intervention in exchange rate level raises investors’ worries that the government may stop supporting the Egyptian currency amid the current unstable political situation that would in turn harm their investments in Egypt.
Mahmoud Negm, deputy head of investment department at Export Development Bank of Egypt, said that supply and demand shall be the factors that determine exchange rate instead of government’s intervention in stabilizing the value of Egyptian currency against dollar currency.
The government will not continue backing the Egyptian currency because of the drop in Egypt’s dollar resources and its foreign reserves which sharply fell by 50% registering US$ 15.7 billion at the end of last February, Negm said.
Eman Abdel Aziz, head of treasury and capital market operations at Arab Bank, noted that the current rise in dollar exchange rate does not necessitate Central Bank of Egypt’s intervention by injecting liquidity in the market; instead supply and demand shall be the determiners of exchange rate level.
Abdel Aziz excluded the idea of conducting dollarized transactions as interest rate on Egyptian pound exceeds investments in US dollar especially in treasury bills whose return was above 16%.