The Central Bank of Egypt (CBE) said on Monday it has decided to adopt a “more flexible exchange rate” aimed at reflecting the strength and real value of the local currency in a short period of time. This is coming after a long period of resisting a devaluation. It has, therefore, been keeping the pound artificially strong through weekly auctions. The CBE devalued the Egyptian pound by almost 13 percent, with the dollar now exchanging on the official market at EGP 8.85. The bank offered $200m in today’s interbank auction at the new rate. The value on Sunday was EGP 7.7301 when $38.8 million was sold at an official auction. Following the decision, the official sale price of the US dollar in banks will increase to EGP 8.95 from EGP 7.83. Egypt has been facing a foreign currency crisis since a 2011 uprising led to the ouster of President Hosni Mubarak, driving away tourists and foreign investors who were major sources of hard currency. Attacks over the years have not made things better. In a bid to manage the shortage, the central bank imposed controls on foreign currency movements about a year ago, capping monthly cash deposits at $50,000, among other things. However, the crisis worsened, forcing the CBE to ease some of the measures. Last week, the central bank lifted caps on withdrawals and deposits of foreign currencies for individuals and companies importing essential goods. Egypt depends heavily on imports.
Central Bank of Egypt's headquarters in downtown Cairo, Egypt, December 21, 2015. REUTERS/Amr Abdallah Dalsh