The policies of Egypt’s central bank are succeeding in restoring stability to the foreign exchange market and controlling inflation, bank governor Hisham Ramez was quoted by state media on Saturday as saying.
The central bank has been letting the Egyptian pound weaken in the official market, probably judging the economy has stabilised enough for it to undertake this process without triggering a run on the currency, though it has not publicly set out its thinking.
Ramez was quoted by official newspaper Al-Akhbar Al-Youm as saying the policies were “beginning to bear fruit as the market is already experiencing a significant decline,” in foreign currencies against the pound.
He also said the policies would lead to the elimination of the “parallel” or black market, which has thrived because of a difference which opened up between official and unofficial currency rates.
Rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the bank effective control over official exchange rates.
Egypt has been suffering from a sustained dollar shortage as political turmoil following the 2011 uprising against veteran leader Hosni Mubarak unnerved foreign investors and tourists, traditionally major sources of foreign currency.
The shortage opened a gap between the pound’s official market rate and the weaker rate at which it trades in illicit money-changing shops and back alleys.
But the pound has strengthened markedly in the black market since former army chief Abdel Fattah al-Sisi’s victory in presidential elections last month.
Black market dealers and bank economists say that the gap between the two rates may vanish as early as the end of this year.