Egyptian pound drops 10 per cent after Ukraine war prompts dollar flight

Egypt’s pound depreciated by 10.67 per cent on Monday after weeks of pressure on the currency as foreign investors pulled out billions of dollars from its treasury markets after Russia’s invasion of Ukraine.

The pound dropped to 17.42-17.52 against the dollar, Refinitiv data showed, after having traded at around 15.7 pounds to the dollar since November 2020.

The country’s central bank also hiked overnight interest rates by 100 basis points in a surprise monetary policy meeting earlier on Monday.

Egypt has been in discussions with the International Monetary Fund about possible assistance, people close to the negotiations have said, but it has not announced any formal request.

Egyptian ports had become blocked with goods after importers could not obtain the dollars they needed for letters of credit to get them cleared, bankers said.

The war in Ukraine has left Egypt facing higher costs for its substantial wheat import needs as well as a loss in tourism revenue from Russian and Ukrainian visitors to Red Sea resorts.

Russia and Ukraine are Egypt’s main suppliers of wheat.

Egypt on Monday set the price of unsubsidised bread at 11.5 Egyptian pounds ($0.66) per kilogram, according to a statement from Prime Minister Moustafa Madbouly’s office.

State-owned Banque Misr announced on Monday it was offering certificates of deposit with yield of 18 per cent.

Foreign investors have withdrawn billions of dollars from Egypt’s money market since Russian troops entered Ukraine.