The Egyptian pound is rapidly depreciating against foreign currencies, nearing 50 per U.S. dollar following recent hikes in metro fares and fuel prices. As of Tuesday, the currency stood at 49.16 per U.S. dollar, according to the Central Bank of Egypt’s website.
Since its initial public offering (IPO) in March, the Egyptian pound has fluctuated between 47 and 48 per dollar in June and July, losing approximately 60% of its value and dropping to around 30 per dollar.
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This depreciation comes a week after the International Monetary Fund (IMF) completed its third financial review of Egypt, approving a drawdown of $820 million. This sum is part of an $8 billion bailout loan aimed at supporting Egypt’s beleaguered economy, which is grappling with a foreign currency shortage, soaring inflation, and instability in the Red Sea due to attacks by Yemen’s Houthi rebels.
“Recent efforts by the Egyptian authorities to restore macroeconomic stability have started to show positive results. Inflation remains high but is declining. A flexible exchange rate regime remains the cornerstone of the authorities’ program,” the IMF stated last week.
Egyptians continue to struggle with rampant inflation. The oil ministry announced a roughly 10 percent fuel price increase late last month. The previous fuel price hike occurred in March, attributed to the rising cost of fuel due to the Red Sea attacks and the depreciation of the Egyptian currency.
The Houthi rebels have targeted commercial vessels in the Red Sea in retaliation for Israel’s war in Gaza. Essential goods like oil, natural gas, and grain traverse the sea lanes between Africa and the Arabian Peninsula to reach the Suez Canal, which handles about 12% of global trade.
In addition to fuel price hikes, Cairo Metro fares officially increased last week, according to the National Tunnels Authority. The new fares range from 2 to 5 Egyptian pounds.
Egypt’s agreement with the IMF in the spring more than doubled the size of its bailout to $8 billion. These price increases were necessary to meet the IMF’s conditions for continued financial support to the country.
