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Pressure builds on Egypt to further devalue currency

The Egyptian pound lost ground on the black market again in recent days in a sign that halving its official value over the past year could still not be enough and the central bank may have to let it slide further.

Egypt has sharply devalued the currency three times since Russia's invasion of Ukraine in February 2022 exposed vulnerabilities in the country's finances. Despite its pledge in October to allow supply and demand determine exchange rates, the central bank has been managing the currency in a tight band that has remained virtually unchanged at around 30.80/90 to the dollar for three weeks while the pound has slid to between 35 and 36 in the black market.

The renewed pressure on the pound has prompted speculation the central bank will need to act again, perhaps as soon as today, when its monetary policy committee meets to decide overnight interest rates.

The weakening currency and soaring inflation, which in February hit a five-and-a-half-year high of 31.9%, also put more pressure on the central bank to raise rates, even if it adds to the costs of servicing climbing government debt.


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