(MENAFN) Egyptian President Abdel Fattah El-Sisi made significant announcements on Saturday regarding the country's economic strategy, revealing that new financing totaling tens of billions of dollars from the UAE and the International Monetary Fund (IMF) has facilitated a shift to a flexible exchange rate system. These remarks mark President Sisi's first public statements since last Wednesday when Egypt initiated a move allowing the pound to depreciate to just under 50 pounds to the dollar, a significant drop from its previous rate of 30.85 pounds. This adjustment represents the latest step in a series of currency devaluations that began in early 2022.
The decision to transition to a more flexible exchange rate regime was underscored by the Egyptian central bank's announcement that it would allow market mechanisms to determine the exchange rate, with interventions reserved for instances of extreme volatility. Assurances were provided regarding the bank's liquidity, signaling its readiness to implement such a system after maintaining pound stability for nearly a year. While prior indications suggested a shift towards a more flexible exchange rate, the authorities had hitherto maintained the pound's fixed exchange rate.
President El-Sisi explained that the decision to float the pound had been postponed last year due to national security concerns, necessitating substantial funding before such a move could be considered viable. However, recent developments, including the infusion of financing from the UAE and the IMF, have provided the necessary support to enable this transition. Notably, in late February, Egypt announced a significant agreement with ADQ Holding, one of the UAE's sovereign wealth funds, which is set to inject $35 billion into the country over two months. This includes a substantial portion of $11 billion transferred from existing deposits, highlighting the depth of the partnership between Egypt and the UAE in bolstering Egypt's economic stability and growth prospects.
President El-Sisi's announcement signifies a pivotal moment in Egypt's economic trajectory, reflecting a strategic shift towards a more market-driven exchange rate system supported by substantial financial backing from key international partners. As Egypt navigates these economic reforms, the collaboration between the government, international financial institutions, and strategic allies like the UAE will likely play a crucial role in shaping the country's economic future.
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