Banking expert Hany Aboul Fotouh said that there are many expectations about the US dollar price decline against the Egyptian pound at the beginning of 2017. He believes 2017 is not expected to witness high leaps in the price of the dollar against the pound.
He said that there are a lot of factors which will lead to the improvement of the pound’s position against the dollar in 2017, most notably the availability of dollar resources from loans that will be obtained by Egypt, including the second tranche of the International Monetary Fund’s (IMF) loan. Egypt is also set to receive other loans from the European Union and the African Development Bank (AFDB), which will increase the dollar cash reserves; thus, lowering the price of the dollar against the pound .
The exchange price of any foreign currency is specified by the size of the demand on that currency, which depends largely on the export capacity of the country. If the state has multiple export markets and contracts at high values, the demand on its currency will increase. In other words, the pound’s power against the dollar depends on the demand on the US currency. The less the demand, the less the impact of foreign currency on the national economy, according to Aboul Fotouh.
He added that according to the rule of supply and demand, the price of the currency stabilises when supply and demand become balanced. Egypt is experiencing an increasing demand for dollars in light of the decline of the supply caused by the gap between dollar income and expenditure.
Aboul Fotouh said that after a full flotation of the pound, there is no targeted price for the dollar, because determining the price will be done according to the rule of supply and demand.
“It is wrong to target a specific price for the pound against the dollar, so the Central Bank of Egypt (CBE) intervenes in specifying the exchange price—this was announced by the CBE on more than one occasion,” Aboul Fotouh said.
He pointed out that investment banks’ expectations indicate that the dollar exchange price will be EGP 13-14, if the government complies with the IMF-backed economic reform programme.