Cairo – The value of the Egyptian pound shed 13% against the US dollar on Monday, registering 17.80 pounds against the greenback after a recent rise in inflation.
The local currency in the Arab world’s most populous country saw a sharp devaluation in 2016 when it lost nearly half its value against the dollar overnight.
The pound was floated at the time as part of a package of reforms in exchange for a $12 billion bailout from the International Monetary Fund.
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The pound’s value went from 15.70 to the dollar on Sunday to 17.80 at midday on Monday, according to rates listed on state-owned bank websites.
The latest depreciation comes as global food supply chains have been dealt a major blow by Russia’s invasion of Ukraine.
As the world’s largest importer of wheat, Egypt relies on both countries for 85% of its supplies of the staple, as well as 73% of its sunflower oil.
Recently, investment bank JP Morgan predicted that the Egyptian pound would weaken, estimating it to be overvalued by about 15%.
Inflation in the North African country stood at 10% in February, according to the country’s statistics agency, reaching an almost three-year high and driven by a 20 % increase in food prices.
The World Bank has warned that a 30% increase in food prices could result in a 12% increase in poverty rates, already hovering at about a third of Egypt’s 103 million-strong population.
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Rising prices have prompted the authorities to impose a tariff on unsubsidised bread for the first time.
The Central Bank of Egypt raised key interest rates by one percentage point during an emergency meeting, in a bid to tackle inflation, it said in a statement on Monday.
The overnight deposit rate increased to 9.25% and the overnight lending rate to 10.25%, while the main operation rate was set at 9.75%.
Egypt is bogged down by a sizeable foreign debt bill that constitutes almost 90% of its GDP.
The authorities have embarked on fiscal reforms and sought to overhaul the taxation regime, but have struggled to control the informal sector, which constitutes a large portion of the country’s economy, according to experts.
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Source: AFP
Picture: Getty Images
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