Since 2011, Egypt currency struggles against dollar

CAIRO (AA) – Egypt’s currency has fallen by 35 percent against the U.S. dollar since a popular uprising forced autocratic Egyptian President Hosni Mubarak to step down in early 2011.

Egypt, which relies heavily on imports, has suffered a chronic shortfall in foreign currency since the uprising, which served to drive away tourists and foreign investors — both major sources of hard currency.

Since Mubarak’s departure, Egypt has lost almost half of its foreign currency reserves, which currently stand at some $17 billion, down from $36 billion before the 2011 uprising.

Under Mubarak, the Egyptian pound had been fixed at 5.79 to the dollar.

After the autocratic leader stepped down and Egypt’s supreme military council took over, the local currency lost 2.6 percent of its value, falling to 6.03 to dollar.

When Mohamed Morsi was elected as Egypt’s first-ever freely elected president, the pound lost another 15.5 percent of its value, plunging from 6.04 to 6.99 to the greenback.

Although Egypt later received some $11 billion in aid, the pound fell even further, eventually registering 8.5 to dollar.

After this, the country’s central bank intervened, pegging the pound to register 7.7 to dollar.

When Morsi was ousted in a 2013 military coup, the Egyptian authorities again intervened, setting the pound at 7 to the dollar.

Under interim President Adly Mansour, who was installed by the military following Morsi’s overthrow, Egypt received billions of dollars in aid from the Gulf States, pushing the currency up to 6.9 to the dollar.

– Devaluation

When former army chief Abdel-Fattah al-Sisi was elected president in mid-2014, the pound dropped again to 7.14 to the dollar.

Ever since, it has continued to fall, hitting 7.6 to the dollar in February.

Egypt’s central bank, for its part, has imposed currency caps in an effort to stop the devaluation and fight a flourishing black currency market.

The bank has also restricted forex movement, which has sapped dollar liquidity in the local market and made it harder for importers to obtain the dollars they need to buy foreign goods.

The bank has also kept the pound artificially strong by rationing dollars at weekly auctions, which has in turn put a strain on its foreign reserves.

These measures, however, have been largely counterproductive, pushing business owners to rely on illegal money changers.

In March, the bank moved again to devalue the Egyptian pound to 8.85 to the U.S. dollar. It later boosted the currency, raising the pound to 8.78 against the U.S currency.

The move, however, caused urban consumer inflation rates to jump from 9 percent in March to 10.3 percent in April, according to the government’s official statistical agency.

The central bank says that core inflation — which excludes items such as fruit and vegetables, the prices of which tend to fluctuate — also jumped in April to 9.51 percent from 8.41 percent the previous month.

This month, the Egyptian pound plunged in the black market, registering a previously undreamt of 11.75 to dollar.

It has since recovered slightly, however, after the United Arab Emirates and Saudi Arabia announced a fresh raft of aid aimed at shoring up Egypt’s faltering economy.

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