[size=30]After a year of floating .. The Egyptian pound has not floated so far[/size]
Trend Press / Agencies
Economists believe that Egypt needs strong flows of foreign direct investment (FDI), increased exports and a return of tourism to strengthen its currency, but a gradual appreciation of the pound is necessary.
After a year of floating, the pound is still half its value, despite a jump in foreign reserves and positive expectations from the International Monetary Fund, which has agreed to lend Egypt $ 12 billion after the flotation decision in a short time.
The central bank canceled the currency peg at 8.8 pounds on November 3 last year, hoping the foreign currency would return to the formal banking system after a scarcity of a bloated black market.
The pound is currently trading at about 17.6 against the dollar, after it was at about 20 pounds after the float directly.
"There has been a huge demand for dollars for some time, and only recently, I can say three to five months ago, I began to see a balance between supply and demand," said Radwa Suweifi, head of research at Pharos Securities Holdings.
Egypt's foreign reserves rose to more than $ 36 billion in July, their highest level since the events of 2011, which drove foreign investors and tourists away.
The high demand for domestic debt instruments due to higher interest rates, as well as grants and loans, was a big part of the jump in reserves.
The decline in the value of the pound after its flotation contributed to the strengthening of Egyptian exports, which led to a reduction in the trade balance of a country dependent on imports, by 37% amid stricter restrictions on imports, but weak industrialization means that non-agricultural exports remain low.
Economists said a sudden and short-term rise in the value of the pound could push foreign investment out of domestic debt instruments. Experts also expect the Egyptian currency to appreciate next year as tourism returns, which are showing signs of recovery.