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Egypt devalues currency by 48% to meet IMF loan demand

Published 03/11/2016

The move by the Egyptian Central Bank followed a plunge in the value of the pound against the US dollar (AP)
The move by the Egyptian Central Bank followed a plunge in the value of the pound against the US dollar (AP)

Egypt has devalued its currency by 48% and announced that the pound will be allowed to float.

The measures meet a key demand by the International Monetary Fund in exchange for a 12 billion US dollar (£9.8 billion) loan over three years to overhaul the country's ailing economy.

The devaluation pegged the Egyptian pound at 13 to the dollar, up from nearly nine on the official market. A central bank auction of dollars will be held later on Thursday, allowing supply and demand to determine the value of the pound for the first time in decades.

The devaluation was virtually certain to cause a steep hike in prices, piling up pressure on President Abdel-Fattah el-Sissi's government to avoid a popular backlash against its handling of the economy. Mr el-Sissi has repeatedly urged Egyptians in recent weeks to rally behind him as he grapples with the country's worst economic crisis in decades.

The much-heralded decision by the Egyptian Central Bank followed a sharp and sudden decline this week in the value of the dollar on the unofficial market, plunging from an all-time high of 18.25 Egyptian pounds to around 13 against the US currency.

The IMF's executive board has yet to ratify the 12 billion US dollar loan provisionally agreed by Egypt and the lender-of-last-resort in August.

Egypt is also facing another painful must - it is expected to reduce or lift altogether state subsidies on fuel to meet IMF conditions. It has already reduced subsidies on household electricity and hiked by 40% the price of sugar for ration card holders.

AP

Press Association

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