CAIRO: The Egyptian pound weakened further against the dollar on the black market on Monday, extending its recent decline despite central bank efforts to close the gap between demand and supply in the dollar-starved economy.
Egypt, which relies heavily on imports, is facing a shortage of foreign currency inflows after a 2011 uprising drove tourists and foreign investors away, causing the country’s reserves to tumble to $16.56 billion in March from $36 billion in 2011.
Black market traders who quoted a range of 10.25-10.28 pounds per dollar last week raised their rates to a range of 10.50-10.65 per dollar on Monday, 8 traders told Reuters.
“The price has been rising rapidly since Sunday evening. There is a lot of demand from some importers,” said one trader, who said he made trades worth over two million dollars within the 10.55-10.60 per dollar pricing range.
A black market for dollars has sucked up liquidity from the banking system as the central bank kept the pound artificially strong and rationed dollars through weekly auctions, putting a strain on foreign reserves.
In an attempt to close the gap between official and black market rates, the central bank devalued the currency to 8.85 per dollar from 7.7301 last month. It later strengthened it to 8.78 per dollar, while adopting a more flexible exchange-rate policy.