Egypt devalues currency by 13%

Business Monday 14/March/2016 13:42 PM
By: Times News Service
Egypt devalues currency by 13%

Cairo: Egyptian central bank devalued the pound by almost 13 per cent and said it will adopt a ‘more flexible exchange rate’ policy to bolster the country’s foreign reserves. Stocks rallied.
The decision will achieve “exchange-rate levels that reflect the strength and real value of the local currency in a short period of time,” the central bank said in a statement on Monday.
The regulator earlier sold $198.1 million to local lenders at 8.85 pounds per dollar. That compares to a previous exchange rate of 7.73 pounds. The benchmark EGX 30 Index for stocks surged 4.1 per cent, the biggest intra-day gain since January 24 in Cairo.
Egypt is grappling with a dollar squeeze that is threatening economic growth in the most populous Arab country. Foreign-currency reserves have tumbled by more than 50 per cent since 2011, though they have stabilised at just over $16 billion in the past six months. Policy makers aim to increase reserves to $25 billion by the end of 2016, the central bank said in the statement.
“Particularly from the bond side, this gets the devaluation issue out of the way, which had been hanging over our heads for a long time,” said Abdul Kadir Hussain, the chief executive officer of Mashreq Capital DIFC in Dubai, which manages about $1.5 billion. The company sold its holdings in Egyptian dollar-denominated bonds last year. “Now that we have this, it could potentially could open up Egypt for us again,” he said.
Policymakers are also weighing steps that would help foreign investors in local government debt hedge against their exposure to the Egyptian pound, a senior central bank official said on Friday. The Monetary Policy Committee is set to meet on March 17.