I wonder what exactly is happening in the dollar exchange market? Why did the American currency rise again after many months of stability? Does this mean that the dollar will continue to rise, or might things calm down a little in the coming period?
In less than a year, the Egyptian pound lost a large part of its value compared to the dollar, and today we are talking about a price that exceeded 50 pounds to the dollar in some banks. This number is not just an economic number, it is a reflection of a group of interwoven problems, local and global. The beginning was with the increase in demand for the dollar in the market. Very Egyptian. Banks have begun to receive huge requests to buy American currency, whether from companies renewing their contracts with foreign partners or importers preparing their stocks for the coming month of Ramadan… All of this at a time when the country itself is experiencing a shortage of hard currency due to a decline in important revenues such as the Suez Canal, which lost more than 6 billion. Dollar during the past 8 months
Ok, why all this pressure on the dollar?
Let us understand the story step by step.. The first reason for our commitments with the International Monetary Fund.. The IMF requires that the exchange rate be flexible, meaning it moves according to supply and demand, but when the demand for the dollar increases in this way, its price naturally rises and the pound weakens.. and the second reason for the exit of foreign investors. Many foreign investors who had put their money in debt instruments such as treasury bills and bonds began converting their profits into dollars and exiting the market. This led to significant selling pressure on the pound during the period. The last.
The third reason is the increase in imports and the lack of hard currency.. Due to the lack of local manufacturing, imports have increased greatly, and this makes the demand for the dollar much higher than the supply, and with the decrease in state revenues from basic sources such as tourism and the Suez Canal, the crisis becomes more complicated.
What effect does this have on our daily lives?
The rise in the price of the dollar is not just a crisis on paper, this is something we see its impact on our daily lives, and the prices of basic commodities such as food and drink are increasing day after day…and the medicine that was originally in crisis has become more expensive and more difficult to obtain. However, industries that need imported raw materials are now facing… Greater difficulties.. As if all this is not enough, we are now seeing a clear impact on energy prices, especially after Egypt returns to importing gas from abroad, and of course this increases the cost for the government and for companies as well.
Does this mean that this crisis continues without solutions?
Analysts see that there are possibilities for a slight improvement next January, and the reason is that foreigners may return to investing in Egyptian debt instruments, and this will increase the flow of dollars into the market. Also, the expectations of the Central Bank to maintain interest rates may support the stability of the situation a little.. But let us be realistic, the improvement will not be significant. Nor quickly.. The economy needs long-term reforms, especially in the manufacturing file and reducing dependence on imports. Short solutions can ease the pressure a little, but they will not address the problem from its roots.
