CAIRO: Egyptian President Abdel Fattah al-Sisi said on Saturday that with tens of billions of dollars in new financing from the United Arab Emirates and the International Monetary Fund, moving to a flexible exchange rate would be possible.
The comments were Sisi’s first public remarks since Wednesday, when Egypt let the pound drop to just under 50 pounds to the dollar from 30.85 pounds - the latest in a series of devaluations since early 2022.
The central bank said it would let the exchange rate be determined by market forces except in cases of excessive volatility, and that it had sufficient liquidity to move to such a system after having held the pound steady for about a year.
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Authorities had previously indicated they would shift to a more flexible exchange rate system, only to revert to keeping the pound at a fixed rate.
Sisi said he had stopped the pound from floating last year for national security reasons because a large amount of funding was needed before making such a move.
In late February, Egypt announced a deal with Emirati sovereign wealth fund ADQ that would bring in $35 billion over two months, including $11 billion converted from existing deposits.
On Wednesday, as they let the pound depreciate sharply, authorities announced an agreement with the IMF to increase Egypt’s current loan and economic reform programme with the fund to $8 billion, from $3 billion previously.
Egypt is also seeking $1.2 billion from the IMF’s Resilience and Sustainability Trust for vulnerable low- or middle-income countries.
“If I have this sum and can achieve a flexible exchange rate determined by demand, then I can make it,” Sisi said during comments at an event in Cairo, referring to the total inflows.
Egypt has been struggling with a long-running shortage of foreign currency that worsened in early 2022, slowing economic activity and leading to shortages of imported goods.
Inflation accelerated to record highs last year, and a borrowing spree under Sisi has left Egypt with high levels of foreign debt.
The crisis dented Sisi’s standing with many Egyptians, a decade into his rule, with critics questioning his promotion of a series of costly mega-projects including a new capital city east of Cairo and some fearing the latest devaluation will bring more pain.
Sisi secured a third term in power in December, and has told Egyptians they needed to endure the economic difficulties and that the projects have supported growth and jobs.
“I never said our difficult circumstances would end in a year or two, not even 10. Countries need up to 75 years to become stable, and what we’ve already achieved is a miracle,” Sisi said.
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