Egypt’s decision to increase interest rates and devalue its currency
This morning, the Central Bank of Egypt raised interest rates by 600 basis points and also implemented a 45% devaluation of the currency. The bank announced that it is releasing the currency to merge the black market rate with the official rate.
Facing a currency crisis and breathing a sigh of relief from the $35 billion direct investment decision made by the United Arab Emirates (UAE) two weeks ago, Egypt has seen new measures from its central bank.
The Central Bank of Egypt raised its policy interest rate by 600 basis points to 27.25%.
The bank also took a step towards the “transition from a fixed to a floating exchange rate regime,” a condition set by the International Monetary Fund (IMF) for new credit.
The dollar/Egyptian pound exchange rate gradually rose from 30.9 this morning to 44.7. Thus, there was an approximately 45% increase in the official rate this morning.
In its announcement today, the Central Bank of Egypt stated that it would allow market forces to determine the exchange rate and aimed for a single exchange rate by bringing together the parallel rate with the official rate.
