There are calls to approve social packages while floating the pound again (European)

The exchange rate of the dollar against the Egyptian pound fell in the parallel market to 55 pounds in morning trading from 70 pounds in Friday trading, amid a state of "paralysis" in transactions, according to what one of the dealers told Al Jazeera Net.

The price of the dollar in the official market is 30.93 pounds, according to the Central Bank of Egypt website.

Stop and expect

Market trading stopped - last Thursday - amid expectations of an imminent reduction in the exchange rate of the pound against the dollar (float), and the market remained awaiting the issuance of the Monetary Policy Committee statement issued by the previously scheduled meeting, and it was content with raising the interest rate by 2% without indicating any other measures. At the level of monetary policy, which led to the cessation of parallel market transactions almost completely.

The dollar began to decline starting from Friday's trading until it reached its lowest levels yesterday at 51 pounds, according to traders, before it rose slightly today to 55 pounds.

This comes amid ongoing negotiations between Egypt and the International Monetary Fund to increase the value of the loan agreed upon in December 2022 from $3 billion to what may exceed $10 billion, according to circulating news.

The International Monetary Fund said, in a statement issued in the early hours of last Friday morning, that it had agreed with Egypt on the main policy elements of the economic reform program, in another indication that the final agreement to increase the loan is nearing completion, according to Reuters.

The head of the International Monetary Fund mission to Egypt, Ivana Vladkova-Hollar, said that the two sides had achieved “excellent progress” in discussions on a comprehensive policy package that could begin long-awaited reviews of the country’s economic reform program.

Hollar added in a statement: “To this end, the IMF team and the Egyptian authorities agreed on the main policy elements of the program. The authorities expressed their strong commitment to moving quickly on all important aspects of Egypt’s economic reform program.”

The Fund suspended the disbursement of loan shares last year after Egypt fixed the exchange rate of the pound against the dollar in March and did not fulfill its pledge to allow market forces to determine its exchange rate.

Hollar, who concluded a two-week visit to Cairo, said that discussions will continue virtually in the coming days “to determine the amount of additional support needed to help fill Egypt’s growing financing gaps from the International Monetary Fund and other bilateral and multilateral development partners in the context of the most recent shocks.”

Egypt has reduced the exchange rate of the pound 3 times since March 2022, from an average of 15.7 per dollar.

Cash reserve

Today, Monday, the Central Bank of Egypt announced the sale of one-year dollar treasury bills worth $1.061 billion in a tender with an average return of 5.149%.

These Treasury bills replace $1.07 billion worth of notes due one year and had a yield of 4.90%.

The Central Bank of Egypt said that the country's net foreign reserves rose from $35.22 billion in December to $35.25 billion in January.

Unjustified movement

Economist Moatasem Al-Shahidi says that the unofficial market is unregulated, as it is subject to rumors and the psychology of dealers in addition to supply and demand, and does not depend on what the official markets depend on for currency trading, adding that the significant decline that occurred is the result of a large, “unjustified” rise in the price of the currency. American.

He pointed out in an interview with Al Jazeera Net that the informal (parallel) dollar market is used by many speculators for the purpose of hoarding, not use, in order to hedge against inflation or the decline in the value of their money.

He explained that the state has begun to take measures, whether through efforts to reach an agreement with the International Monetary Fund or through recent agreements with the European Union to obtain financing or by selling assets to provide cash to enter the market, in addition to the austerity plan announced by the government, which includes reducing the value of the investment plan by 15% and not starting projects. New and completion of projects that are 70% complete.

But Al-Shahidi warned that if money is not pumped into the market in a step following the confusion that occurred in the market, the green card may rise again.

He pointed out that flotation takes place under a set of decisions and circumstances, including the necessity of having dollar revenues that enable the state to maintain the exchange rate, and interest rates must be high to tempt dollar holders to give it up in order to obtain returns on deposits and local savings instruments.

He said that the issue of floating occurs suddenly to attract remittances from outside the formal banking system, calling for the adoption of social packages to protect vulnerable groups from the inflationary wave accompanying the lowering of the exchange rate.

Source: Al Jazeera + agencies