Egypt has devalued its currency the Egyptian Pound from EGP 15.7/$1 to EGP18.2/$1, representing a whopping 13.7% devaluation rate.
In context, a 13.7% devaluation of the naira from the official N416/$1 will mean the Naira weakens to about N480 or from N580 to about N670/$1
The country’s economic prospects have diminished considerably since the war between Russia and Ukraine began over a month ago. Egypt relies on heavily wheat imports and earns most of its export revenue from tourism.
The war triggered an early monetary policy meeting by its central bank and also raised its deposits and lending rates by 1% from 9.25% and 10.25%.
- Just like Nigeria, Egypt is facing a rising inflation rate with February inflation topping 8.8% (4.4% a year earlier). Egypt has a foreign reserve of about $40.9 billion as of the 3rd of March 2022.
- Egypt operates a managed exchange rate system where rates are moved depending on the direction of forex supply, inflation, and interest rates.
- Despite the devaluation, the country still maintains discounted exchange rate for strategic imports.
Russian Ukraine War
The war between Russia and Ukraine has negatively impacted the global commodities market tipping on prices of key products such as oil, gas wheat to record levels. The country relies heavily on wheat for bread, one of its major staple foods. In fact, some of their bread sold in Egypt is subsidized in Egypt.