Double boost stabilizes Egyptian pound vs U.S. dollar

After months of devaluation, the Egyptian pound appreciated from 8.4 pounds to US$ 1 last week in the black market to 7.3 pounds to a dollar nowadays, following the announcement that Qatar and Libya gave Egypt a US$ 5-billion double boost.

"The U.S. dollar depreciated in the black market after Qatar and Libya announced to offer Egypt a total of US$ 5 billion in loans," one of the black market dealers told Xinhua on condition of anonymity.

Qatari Prime Minister Sheikh Hamad Bin Jassim said last week that his country would provide Egypt with an extra loan of US$ 3 billion, besides earlier loans of US$ 5 billion that had already been received by Egypt.

Also, Libya announced last week that it would grant Egypt an interest-free US$ 2-billion loan to boost the latter's ailing economy and alarming foreign currency reserves.

"By the Qatari and Libyan loans, we know that the Central Bank of Egypt (CBE) would gradually offer larger amount of dollars in the market," the dealer added, expecting further dollar depreciation in the black market in the near future.

The black market in the country flourished after depreciation of the Egyptian pound due to declining foreign currency reserves.

A recent CBE statement showed that the foreign currency reserves slumped from US$ 36 billion in January 2011 to US$ 13.4 billion at the end of March 2013.

"In fact, the currency black market is affected by more than one factor, including the import seasons in September and January and the CBE's capability to offer large amount of dollars in the market," said the black market vendor.

The sinking foreign currency reserves and the scarcity of dollars in the legal exchange market drove those in need to resort to the black market.

"I own an import and export company and I am in dire need for dollars to run my business," Alaa Eddin, a 54-year-old businessman, told Xinhua.

He continued that he went to the bank last week to buy dollars but the bank declined, "so I had to resort to a black market vendor who sold me the US$ 1 at 8.2 Egyptian pounds."

Banking expert Youssef Ibrahim, also the head of an Islamic economic center at Al-Azhar University, said that receiving financial aids from other countries would help stabilize the foreign fund reserves and curb the black market phenomenon.

"The sinking of the Egyptian pound led to great popularity of dollars, resulting in more devaluation of the pound and more appreciation of the dollar," Ibrahim told Xinhua.

In a bid to stabilize the value of the Egyptian pound, which has dropped more than 10 percent against the dollar since last December, the CBE applied a new policy of trading dollars through auctions and limiting the shares of dollars provided to national banks.

Bassant Fahmi, a second banking expert saw that the new policy "was not enough" to overcome the full-blown currency crisis.

"The government should set a plan to increase exports and boost tourism which are the basic sources of national income," Fahmi told Xinhua, noting that tourism alone brought Egypt 13 billion dollars in 2010.

Philippines News agency