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Sisi election bolsters black market currency

  • File - A pedestrian walks past a currency exchange shop and street stalls after Abdel Fattah al-Sisi took more than 90 percent of the vote in a presidential election, according to provisional results, in Cairo, May 29, 2014. (REUTERS/Amr Abdallah Dalsh)

CAIRO: The Egyptian pound strengthened in the black market Tuesday, lifted by reports suggesting new aid from Gulf Arab states that could alleviate a persistent dollar shortage are on the horizon.

Dollar shortfalls have kept the pound trading weaker in the official market than in a thriving black market for more than a year, although the central bank has allowed the pound to weaken at its regular dollar sales since March.

Traders and economists have called the move a managed depreciation, welcomed as an indicator that the gap between official and black market rates for Egypt’s tightly controlled currency may narrow further in coming months.

The rates at which banks are allowed to trade dollars are determined by the results of the central bank sales, giving the bank effective control over official exchange rates.

Egypt elected former army chief Abdel-Fattah al-Sisi as its new president in a landslide win last week.

In the black market, three traders said the dollar was offered for around 7.35 pounds, a much stronger rate than last week’s rates of around 7.50, attributing the move to hopes that the new president might attract new investment and aid.

The dollar changes hands for around 7.15 pounds at official rates, which shows the pound would have to weaken a lot to compete with black market prices.

“For two days the price has fallen because there is a new president but it will go up again,” said one black market trader, quoting short-term expectations of new foreign aid.

Local papers have run headlines saying new aid packages from Arab Gulf countries would follow Sisi’s election, quoting unidentified officials. But officials in Egypt and the Gulf could not confirm the reports.

Sisi, who toppled Egypt’s first freely elected president, Islamist Mohammad Morsi, last July following mass protests, took more than 90 percent of the vote and joins a long line of leaders from the military.

Saudi Arabia, Kuwait and the United Arab Emirates have showered Egypt with billions of dollars of aid since Morsi’s overthrow, although no new aid has been announced for months.

Egypt wants to repair its economy, damaged by social and political upheaval that has unnerved foreign investors and tourists since a 2011 uprising swept veteran autocrat Hosni Mubarak from power.

 
A version of this article appeared in the print edition of The Daily Star on June 04, 2014, on page 5.
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Summary

The Egyptian pound strengthened in the black market Tuesday, lifted by reports suggesting new aid from Gulf Arab states that could alleviate a persistent dollar shortage are on the horizon.

In the black market, three traders said the dollar was offered for around 7.35 pounds, a much stronger rate than last week's rates of around 7.50, attributing the move to hopes that the new president might attract new investment and aid.

The dollar changes hands for around 7.15 pounds at official rates, which shows the pound would have to weaken a lot to compete with black market prices.


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