After it withstood the losses of emerging market currencies and the pressures caused by the Corona virus pandemic, the Egyptian pound finally fell to record 16.21 to the dollar on Monday, while the black market again heads its head amid speculations on the Egyptian currency.
In addition, experts' expectations regarding the dollar price against the Egyptian pound varied during the coming period, as they expected 3 prices until the end of this year.
The pound was at its height after the liberalization of the exchange rate in late 2016, when it recorded 15.51 pounds to the dollar on February 21. Since then, the pound has fallen 4.5 percent to this day.
"The decline of the Egyptian pound is related to the Corona virus crisis and its repercussions," said the managing director of the Bank of Egypt, Mohamed Badir.
The pandemic has affected some of the most important foreign exchange resources for Egypt in the past three months, especially tourism, which accounts for about five percent of gross domestic product, and remittances from Egyptians abroad. It also caused foreign currency exit from domestic debt markets.
Foreign reserves fell to $ 36.0037 billion at the end of May, after peaking at $ 45.51 billion in February.
Ehab Rashad, deputy chairman of Mubasher Capital Holding for financial investments, agrees that the main reason for the pound's decline against the dollar is the fallout from the Corona, but he attributes the pound's decline to foreign exit from treasury bills and bonds, as well as falling dollar resources from the Suez Canal, tourism and foreign transfers.
"The pound's decline will have direct negative impacts on prices and living standards," he said, noting that inflation rates in Egypt have been affected by the exchange rate, given the heavy dependence on imports.
A research note for HSBC predicted last week that the exchange rate will record 16.5 pounds for the dollar in the coming weeks and 17.5 pounds at the end of the year, instead of 17 pounds in previous expectations, with a tendency towards a more severe decline in the second half.
The memo added that the data highlight the pandemic pressure of Covid-19, as it shows that the central bank and commercial banks withdrew more than $ 21 billion of their foreign assets in March and April to keep the currency stable in the face of a steady displacement of capital.
"I expect the pound will continue to decline until it reaches the level of 18 pounds by the end of the year in the official market ... the parallel market for the dollar has returned again with a lack of currency," said Hany Tawfiq, former head of the Egyptian and Arab Societies for direct investment.
It was not immediately possible to contact the Central Bank for comment.
Egypt took steps to raise foreign liquidity, including the issuance of international bonds, and reached an initial agreement on Friday with the IMF on a $ 5.2 billion credit willingness loan for a year to help the country deal with the Corona pandemic and its economic repercussions. This loan comes in addition to the $ 2.77 billion in emergency financing that the Fund has already provided to Egypt.
Economists had expected that the fund would look at the very least for a moderate devaluation.
For her part, Radwa El-Swaify, head of research at Pharos Investment Bank, said, "The pressure on the pound is related to the extent of the continued decline in the dollar resources of the country, especially from tourism and remittances from Egyptians abroad ... In Pharos, we expect the dollar to reach the level of 17 pounds by the end of the year."