5 Pounds (Arab League) – Egypt

In 2005, Egypt's currency situation was defined by a protracted period of a heavily managed exchange rate for the Egyptian pound (EGP), pegged primarily to the US dollar. This policy, maintained by the Central Bank of Egypt (CBE), aimed to provide stability and control inflation but came under increasing strain. The official rate was artificially strong, while a thriving black market for dollars emerged, creating a significant and widening gap between the two rates. This disparity reflected underlying economic pressures, including a growing trade deficit, insufficient foreign direct investment, and mounting public debt, which eroded confidence in the pound's official valuation.

The government of President Hosni Mubarak, under Prime Minister Ahmed Nazif, was under mounting pressure from international institutions like the IMF and domestic business circles to move towards a more flexible exchange rate. Proponents argued that devaluation would boost exports, attract foreign investment, and eliminate the distortions of the parallel market. However, the regime was deeply cautious, fearing that a sharp devaluation would trigger social unrest by making imported goods—particularly vital subsidies like food and fuel—more expensive for a population already grappling with high unemployment and poverty rates.

Consequently, 2005 became a year of hesitant transition rather than decisive action. The CBE did allow for a very gradual and controlled depreciation of the pound within its managed band, but it fiercely defended the official rate against speculative attacks, spending billions in foreign reserves to do so. This period set the stage for a more significant shift; the pressures that built up in 2005 ultimately contributed to the CBE's decision to implement a surprise, large-scale devaluation in 2006, moving to a more flexible currency regime, albeit one that remained tightly managed in practice.