100 Pounds – Egypt

In 2021, Egypt continued to navigate a complex currency situation characterized by a managed float of the Egyptian pound (EGP) that had been in place since a major devaluation in 2016. The Central Bank of Egypt (CBE) maintained a policy of relative stability for the pound against the US dollar, with the official exchange rate hovering around 15.7 EGP for much of the year. This stability was actively defended through high-interest rates and significant foreign exchange reserves, which were bolstered by substantial borrowing from international markets and continued inflows from remittances, tourism, and Suez Canal revenues. However, this official stability masked a persistent and growing pressure on the currency, with a significant gap emerging between the official bank rate and the much higher black-market rate, indicating underlying demand pressures and a shortage of hard currency in the formal banking system.

The pressure stemmed from several structural challenges. Egypt remained heavily import-dependent for essential goods like wheat and medicine, creating consistent demand for dollars. Furthermore, the economic disruptions caused by the COVID-19 pandemic in 2020 had severely impacted key foreign currency-earning sectors like tourism, while also leading to capital outflows from emerging markets. Although these sectors showed signs of recovery in 2021, the scars remained. Consequently, the parallel market rate for the dollar rose to approximately 18-19 EGP, reflecting market skepticism about the official valuation and creating a two-tier system that discouraged formal remittances and distorted business planning.

The government's strategy to manage this situation was multifaceted, focusing on attracting foreign currency through non-debt instruments to avoid increasing the already high public debt burden. This included a renewed push for its ambitious privatization program, selling state-owned assets to foreign investors, and promoting direct investment in sectors like green energy and technology. The authorities also maintained capital controls and import restrictions to conserve dollars. By the end of 2021, the currency situation was in a fragile equilibrium—officially stable but under clear strain, setting the stage for the more decisive measures, including a further devaluation and a shift to a more flexible exchange rate regime, that would follow in early 2022 in agreement with the International Monetary Fund.