There is great disquiet in Egypt about over the government’s decision to float the national currency, the Egyptian Pound, whose value has been declining against the dollar. Is this decision in the interest of the Egyptian economy or will it lead to an increase in poverty in Egyptian society?
Opinions in this regard differ among the large number of local and foreign economic experts currently debating on this issue. The good thing is that Egypt is not one of the countries that are subject to economic embargoes, like some countries in the world that suffer from economic and financial restrictions, such as those imposed on Iran, which has been suffering from an embargo for more than forty years.
Most ordinary Egyptians are upset that the value of the US dollar rose to 24 pounds (at the time of writing), up from 19 pounds. But other experts and social media writers believe that the decision taken to liberalize the exchange rate will find stability and lead to attracting more foreign investment flows during the coming period. This, in turn, will boost the pace of the Egyptian economy and provide more job opportunities on the back of the many feasible projects established by Egypt during the past few years.
The decision to float the Egyptian pound comes in the wake of the Central Bank of Egypt’s decision several months ago to actually reduce the currency rate by 16% in order to satisfy the demands of the International Monetary Fund, which sometimes prescribes unconvincing policies to governments in exchange for loans. Egypt needs loans and aid in light of the crises it is going through due to the large population growth, the decline in investments, grants and foreign aid. Besides, inflationary pressures are affecting the prices of goods and services due to the decision to raise the interest rate on deposits, which is directly reflected in global economies.
The decision to float the Egyptian currency was part of conditions set by the International Monetary Fund to approve a new loan that Cairo requested in the sum of 3 billion dollars. This caused the Egyptian currency to decline in recent days. It has resulted in negative impacts to the Egyptian economy, particularly imports. It has also increased the value of locally manufactured products, especially those dependent on raw materials from abroad.
Most of the decisions of the International Monetary Fund with developing countries are related to the need to reduce the price of local currencies, especially countries that cannot find an alternative. However, such a decision gives an opportunity for traders to get their desired hard currency to import what they see fit for their commercial and investment projects, while the decision will boost the flow of more tourists to Egypt in the next stage. The lingering question is: Will the Egyptian economy achieve stability in the wake of the decision to devalue the pound by 16 per cent?
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