According to Bloomberg, Egypt has no plans to peg the Egyptian pound to a basket of currencies. However, the discussion around unpegging the EGP from the USD has been floating since last year.
A source speaking to Bloomberg has denied recent local media reports regarding Egypt’s plans to peg the EGP to a basket of international currencies and gold. The news outlet noted that the source was an official with direct knowledge of the matter.
Earlier this week, local media quoted Fakhry El Fiqi, the head of the House Planning and Budget Committee. El Fiqi shared that the Egyptian authorities will most likely reach an agreement with the International Monetary Fund (IMF) in early 2024 to attach the EGP to a new group of hard currencies including EUR, JPY, and GBP.
According to Bloomberg, Egypt has no plans to peg the Egyptian pound to a basket of currencies.
However, the discussion around unpegging the EGP from the USD has been floating since last year.
During his speech at Egypt’s Economic Conference in 2022, then-acting CBE governor Hassan Abdalla revealed that the central bank was working on setting an index for the EGP that would potentially link it to a basket of foreign currencies and gold besides the USD.
Unpegging the EGP from the USD would help Egyptians accept the idea of a free-floating currency, he added, and was quoted saying “Part of our success will be in changing the culture and idea that we are pegged. We want to be seen against every currency”.
When participating in international trade, countries ensure the stability of their currency, as well as safeguard the competitiveness of their exported goods and services, by pegging their currency to other stable currencies.
Many countries choose to peg or “fix” their currency to stronger currencies to promote trade as it reduces foreign exchange rate risk and other risks, such as political risk, with a significant number of currencies pegged to the USD.
Discussing the potential change, a separate local media outlet recently interviewed a senior government official who explained that “The USD will have the largest impact on the index, seeing its significance for commercial transactions and import bills. But the index aims to offer a stable indicator, showing the fair value of the EGP in comparison to other currencies.”
