5 Pounds – Egypt

In 2007, Egypt's currency situation was characterized by a period of managed stability and mounting underlying pressures. The Egyptian pound (EGP) was under a de facto peg to the US dollar, maintained by the Central Bank of Egypt (CBE) within a narrow band. This policy, supported by strong inflows of foreign currency from tourism, Suez Canal revenues, and rising remittances, provided a facade of calm. However, this stability was increasingly artificial, as the CBE was actively defending the pound's value by spending its foreign reserves to meet high domestic demand for dollars.

Beneath the surface, significant economic vulnerabilities were eroding this position. A persistent and widening current account deficit, driven by a growing import bill for food and fuel, was draining foreign exchange. Furthermore, inflation was becoming a serious concern, reaching double digits by mid-2007, partly fueled by global commodity price shocks. This created a policy dilemma: maintaining the pound's strength helped curb imported inflation but made Egyptian exports less competitive and encouraged more imports, worsening the trade imbalance. The fixed exchange rate was increasingly misaligned with economic fundamentals.

Consequently, 2007 served as the final year of apparent stability before a period of significant adjustment. The global financial crisis of 2008 would later exacerbate these pressures, leading to a gradual but sustained depreciation of the pound in the following years. The situation in 2007 thus represented the end of an unsustainable peg, highlighting the accumulated imbalances that would eventually force Egypt toward a more flexible exchange rate regime in the face of mounting inflationary and balance-of-payments pressures.