Egypt’s central bank examines 4 scenarios for EGP future against dollar

The Central Bank of Egypt (CBE) is looking into four scenarios for the future of the Egyptian pound against the US dollar after fixing the price of the former on Tuesday.

The official explained that these scenarios include leaving the current situation as is and continuing to fix the pound’s value at EGP 8.78 to the dollar; fixing the pound with a commission to provide currency for some sectors that require the US dollar; allowing for partial fluctuation of the exchange rate; or allowing for total fluctuation of the exchange rate.

According to the official, Governor of the CBE Tarek Amer is more inclined towards implementing the latter scenario, which is allowing the exchange rate to fluctuate completely as opposed to being fixed. However, this scenario will face a challenge due to an absence of foreign exchange and strong cash reserves that help inject the required liquidity into the market in order to control the movements of the dollar.

The CBE is awaiting the entrance of US dollar flows estimated at $5.5bn over the upcoming months in order to enhance the bank’s ability to manage the exchange rate and support the foreign exchange reserves.

The flows include $2bn from Saudi Arabia and a similar amount from the United Arab Emirates, as well as $1bn from the World Bank and $500m from the African Development Bank (AFDB).

Sources said that the spending of the two loans from the World Bank and the AFDB depends on the approval of a number of laws by the parliament, most importantly the value-added tax law.

“The CBE might deliberately be sending mixed signals about the exchange rate throughout the upcoming months with the goal of confusing US dollar speculators in order to completely eliminate these kinds of speculations,” the sources added.

Source: Daily News Egypt