Egypt Pound Dips Further on Black Market Amid Devaluation Fears

Mirette Magdy, Bloomberg News

A customer hands over Egyptian pound banknotes for a purchase at Al-Monira food market in the Imbaba district of Giza, Egypt, on Saturday, Jan. 7, 2023. Egypt’s urban inflation accelerated at its fastest pace in five years as several rounds of currency devaluation filtered through to consumers. Photographer: Islam Safwat/Bloomberg , Bloomberg

(Bloomberg) -- The value of Egypt’s pound on the local black market for US dollars diverged further from the official bank rate, amid speculation the cash-strapped country might enact its fourth devaluation since March 2022.

The pound was changing hands at about 35.5-36 per dollar on the parallel market Thursday, according to a number of traders. That compared with a rate of about 30.9 a dollar at the North African nation’s banks.

Read more: How to Know Where Egypt’s Once-in-Decade Crisis Is Heading

Egypt is seeing intensifying pressures on the pound as it struggles to secure overseas inflows into its local debt market and foreign direct investment, including from the Gulf. The currency has already lost around half its value in the past 12 months, with loosening control of the exchange rate a key condition of a $3 billion loan deal with the International Monetary Fund.

Less than a month ago, the pound was trading at about 33.5 to the dollar on the black market versus an official rate of 30.73.

Read: IMF Says Egypt Loan Review Yet to Start as End-March Goal Nears

In the non-deliverable forwards market, traders are also hedging against the prospect of a steeper decline in the pound. The currency’s three-month contract on Thursday slumped past 35 per dollar for the first time, just hours before the central bank is due to announce its latest interest-rate decision.

--With assistance from Netty Ismail.