Last week, the Egyptian pound experienced a sharp depreciation, falling to around 32 to the dollar from 27.60 at the start of the week. However, by Monday’s close, the pound had rebounded to 29.61 to the dollar. Despite this short-term decline, the Egyptian foreign exchange market has seen an influx of investment in the past three days.
According to a statement by Egypt’s central bank, foreign investors transferred more than $925 million into the country’s foreign exchange market in the past three days. This represents a significant increase in foreign investment, particularly considering that the average daily inflow of foreign currency in 2020 was $53 million.
The statement also revealed that additional foreign currency, as well as remittances from Egyptians living abroad and income from tourism, also flowed into the market over the past three business days.
In October 2022, Egypt reached an agreement with the International Monetary Fund (IMF) for a $3 billion financial support package. As part of the agreement, Egypt promised to shift to a “durably flexible” exchange rate. The country had turned to the IMF for assistance after the war in Ukraine led to increased costs for wheat and oil and decreased tourism from key markets such as Ukraine and Russia.
Banks were able to fulfill more than $2 billion in requests by Egyptian importers over the past three days, in addition to requests from other clients. This is a significant increase in the demand for foreign currency and a sign of increased economic activity in the country.
Furthermore, the statement also noted that sales of Egyptian treasury bills of one year or less surged at auctions on Thursday and Sunday as investors continued to flood back into the market following the pound’s depreciation. This is a positive sign of investor confidence in the Egyptian economy and its ability to recover from the recent currency depreciation.
Overall, the influx of foreign investment and increased demand for foreign currency in the past three days is a positive sign for the Egyptian economy and a sign that it is on a path to recovery.