The Egyptian pound’s slide against the US currency on the parallel market hit a record low this week, widening the gap with the official rate to around 47%. The Egyptian pound has been changing hands at around EGP13 per US dollar on the parallel market compared to EGP8.78 on the official market, controlled by the central bank dollar auction system.
The growing differential between the parallel and official market rates has effectively created a dual exchange rate regime, which the central bank is unwilling to abandon in fear of stoking up inflation already hovering around 14%, following the 14.5% devaluation of the Egyptian pound in March.
However, a visiting World Bank delegation urged the Egyptian authorities this week to adopt a flexible exchange rate regime backed by a beefed-up foreign exchange reserve position. Central bank governor Tarek Amer has stated earlier in the year that Egypt needs to up its reserve position to $25bn-$30bn from the current $17.5bn to embark on a flexible exchange rate regime.
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