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The value of Egypt’s currency, the pound, fell 15 percent last week to a record low of 23.09 to the U.S. dollar after the central bank raised a key interest rate by two percentage points.
The shifts followed Egypt’s agreement with the International Monetary Fund (IMF) to adopt a “flexible” exchange rate in return for $3 billion in aid, with the prospect of more to follow, after the war in Ukraine and Western sanctions left the country scrambling for suddenly scarce supplies of wheat and other essentials.
Several international banks complained that Egypt’s pound was too expensive as the value of the dollar continued rising.
Egypt is also due to receive $5 billion from other international organizations and has requested another $1 billion from the IMF’s recently established sustainability fund.
Egypt’s dollar-denominated bonds rose in price on news of the deal, giving investors hope that the country now can avoid default, but the bonds gave back some gains when bondholders saw the size of the IMF’s support was less than hoped.
TRENDPOST: Egypt’s economy and the nation have been in steep decline since the Arab Spring revolutions that began in December 2010.
Up until then, when it peaked in 2010, Egypt’s tourism sector served about 14.7 million visitors, accounted for about 12 percent of the nation’s workforce and provided tourism revenues of nearly $12.5 billion that contributed more than 11 percent to the nation’s GDP. Last year, tourism accounted for just 5 percent of Egypt’s GDP. And back in 2014, Egypt was in the grips of a bloody civil war with its people living under martial law. Even though the military overthrew the democratically-elected government, the White House under the Nobel Peace Prize winner Barack “Hope and Change You Can Believe In” Obama acknowledged the military dictatorship and Washington continues to provide military aid… despite U.S. laws explicitly banning military funding after a coup.