Egypt's currency float results surpass expectations: central bank

The recently-implemented full float of Egypt's local currency was a must-do "mission impossible" but its fruitful results surpassed expectations, said Tarek Amer, governor of the Central Bank of Egypt (CBE), in an interview with the Enterprise daily press publication released Thursday.

The CBE decided to devaluate the Egyptian pound by 48 percent on Nov. 3, allowing full float of the pound based on offer and demand for the U.S. dollar, the exchange rate accordingly rose from about 8.8 pounds to 18 pounds at highest point per dollar.

Amer said that the market is "rewarding Egypt," with portfolio investors in the debt market came almost immediately.

The stock market is up 35 percent from Nov. 3, the best performing market in the past month, globally, he said, adding that it has been on the upswing even though emerging markets were down.

The CBE chief also said that trading dollars in the market at their actual rates is an incentive for foreign investors.

Recession over the past five years of political turmoil hit the country's main foreign currency resources including tourism, foreign investments and exports, which led to a huge dollar hike and a wide gap between its official and black market exchange rates, affecting many import-based businesses.

It is viewed that the move was a step in the right direction amid an economic recession and a growing foreign exchange black market, which is currently brought under control.

Amer praised the move as a model for the region, emphasizing that Egypt is the only economy in the Arab world with a floating exchange rate regime, which should be protected as the market is adapting to the new regime.

"For the first time, the country's banks have found themselves responsible for setting foreign exchange prices rather than waiting for the CBE. This is new to them, but our banking system is very strong, very seasoned, and they've done a marvelous job," he said.

The move was also praised by the International Monetary Fund (IMF) who delivered later in November 2.75 billion dollars to Egypt as the first batch of a 12-billion-dollar loan to finance the country's three-year economic reform program.

The CBE chief expressed understanding that importers and businessmen do not want to buy foreign exchange at these levels because of the "volatility," suggesting more attention on "the real economy" rather than "the exchange rate." Endit