The Egyptian pound weakened to close at 50.0024 to the dollar, having breached the 50 pound psychological barrier for the first time since March, Egypt’s Central Bank said on Thursday, Reuters reports.
The pound has traded within a narrow range just short of 50 to the dollar since Egypt signed an $8 billion financial support package with the International Monetary Fund on 6 March. Under the IMF agreement, Egypt pledged to let supply and demand determine the currency’s value.
The currency has been coming under particularly strong pressure in recent weeks ahead of the imminent maturing of Egyptian pound treasury bills held by foreign investors and the due dates of other payments, bankers, brokers and analysts said.
Foreigners were heavy buyers of nine- and 12-month Egyptian treasury bills in the weeks after Egypt signed the IMF agreement, and these are maturing in December and March, creating a potential spike in demand for dollars should enough investors seek to repatriate their funds.
Over one trillion pounds worth of local currency treasuries are due to mature in each of December and March, according to one banker’s calculations using Central Bank data.
Egypt also has $933 million in repayments to the IMF coming due in the second half of December for borrowings under previous programmes, according to IMF data.
In addition, rapid growth in Egypt’s money supply has put pressure on the dollar exchange rate while helping to fuel inflation. M2 money supply grew by 29.59 per cent in the year to end-September compared to 2.6 per cent in the United States.
In the year before the agreement, the Central Bank had kept the currency fixed at 30.85 to the dollar, leading to a severe shortage of foreign currency in the Egyptian market and a slowdown in vital imports.
