Egypt: Chaos in foreign exchange market, with several prices of US dollar against the pound

Estimates of the volume of transactions in the informal market in Egypt amount to $8 billion, according to Al-Arabiya, citing a banker.

The Egyptian economy went through conditions similar to those we are witnessing nowadays, in terms of the major shortage of foreign currency and resorting to the International Monetary Fund, its requirements and preconditions, which most prominently the floating of the Egyptian pound to move according to the mechanisms of supply and demand.

Such conditions used to push the parallel market to relative activity for some time, and therefore there used to be two exchange rates for the dollar against the pound in the market.

However, the situation this time seems to be more complicated. In fact, there are not only two prices for the dollar against the pound; but there are several prices in the unofficial market, in addition to the official market, which led to a state of chaos in the markets amid large leaps in commodity prices, exceeding all standards.

A banking source confirmed that estimates of the volume of transactions in the informal market currently amount to about $8 billion, most of which are from tourism companies, as well as remittances of Egyptian expatriates, according to Al-Arabiya.

The source, who declined to be identified due to the sensitivity of the issue, confirmed that banks currently receive only a very limited percentage of tourism companies’ revenues and remittances coming from Egyptians working abroad, as most of them have already gone to the parallel market.

The foreign currency’s purchase and sale in the parallel market is traded at a price of up to EGP 30 to the dollar.

A source told Al-Arabiya that there is a state of reluctance to deal in this market, pending a new move by the Central Bank of Egypt to devalue the Egyptian pound immediately before the International Monetary Fund discusses Egypt’s file on 16 December.

The other price that is circulated in the unofficial market, especially for car companies and gold dealers, where these products are priced up to EGP 36 to the dollar.

Finally, there is the dollar exchange rate for the companies that wish to open documentary credits, but do not have export proceeds, as they resort to exporters who have proceeds that they do not need, and in this case the dollar exchange rate exceeds 36 Egyptian pounds to the dollar.

This chaos in the foreign exchange market in Egypt is the result of a large shortage of foreign currency as a result of the shock caused by the Russian-Ukrainian war, which led to the exit of foreign investments in debt instruments, which the Egyptian Finance Minister estimated in exclusive statements to Al-Arabiya a few days ago at about $22 billion.