The World Bank agreed on Tuesday to provide Egypt with the second tranche worth $1bn of its $3bn total loan aimed at supporting job creation and spurring growth, according to a statement from the bank.
Asaad Alem, the World Bank’s country director for Egypt, Yemen and Djibouti, said that the bank is happy to continue supporting Egyptian reform programmes aimed at creating jobs and increasing the competitiveness of Egypt’s business institutions.
As news of the loan broke, the value of the Egyptian pound depreciated on Tuesday as the US dollar registered a new record high against the pound.
The exchange rate hit EGP 19.40 for buying and EGP 19.85 for selling at its highest, while the lowest value was set at EGP 19 for buying and EGP 19.20 for selling.
The official exchange rate at the Central Bank of Egypt (CBE) was estimated at EGP 19.1530 for buying and EGP 19.5605 for selling, up from EGP 18.8088 for buying and EGP 19.1157 for selling on Monday—an increase of EGP 0.3442 for buying and EGP 0.4448 for selling.
The exchange rate has been seeing hikes since the beginning of the week. Bank officials attributed it to the high demand on the greenback.
According to Osama El-Menilawy, assistant general manager of the financial sector at a private bank operating in Egypt, the high demand on the dollar is caused by companies finalising their budget and foreign companies repatriating their profits abroad, next to the usual demand by importers.
He added that foreign companies are worried about the exchange rate going further up; hence, they buy now to curb their losses.
Moreover, some importers believe they can import and make profits at the current rate, according to him.
He stressed that the rising exchange rate is nothing to worry about. “This is the nature of a free exchange rate driven by supply and demand,” he added.
In addition, he explained that the US dollar price will continue to rise as long as the demand continues with no resources to cover it until it stabilises.
He noted that it will be hard to predict that level in a free market, as the Egyptian market is new to this experience.
Meanwhile, the Egyptian Exchange (EGX) closed at its highest level at 12,148 points, driven by the exchange rate hike at banks on Tuesday.
The EGX increased by 3.37%, supported by foreigners’ purchases worth EGP 112m, while Egyptians bought shares worth EGP 10.8m and Arabs EGP 101.2m.
The market capital reached EGP 602.2bn during Tuesday’s trading.
Hany Helmy, chairperson of Al-Shorouk Brokerage, said that the decline of the Egyptian pound’s value against the US dollar tempts investors to invest in the EGX as a financial tool that they use to offset their losses.