Does the black market end for the dollar in Egypt?

The price of the dollar fell on the parallel (black) market in Egypt, on Sunday, to less than 29 pounds, after its price before the Central Bank of Egypt’s decision to raise the interest rate, reached more than 36 pounds on the black market, while the official price of the dollar in banks Not more than 25 pounds.

The price of the dollar decreased on the black market against the Egyptian pound, and on the pages that follow the exchange market in Egypt on social media platforms, prices ranged between 28.70 and 26 pounds per dollar, which reduced the large difference in the official and parallel prices, which reached about a third of the price value, which affected the Prices of goods and services and raising their price above the real value.
This comes after the Central Bank of Egypt’s decision, on Thursday, to raise interest rates by 300 points, which had an impact on currency rates, especially the dollar, with the start of banks’ work.
In a recent report, the American investment bank, Goldman Sachs, confirmed that the effective real exchange rate model reveals that the dollar’s price against the pound is overvalued.
He added that the pound is structurally undervalued, and at the same time, the exchange rate is weakening sharply and stands at about 36 pounds to the dollar, which is about 33 percent higher than the official rate.
He explained that the main factor in that discrepancy is the lack of liquidity in the monetary sector, due to the weakness of the balance of payments, and the exit of capital against the background of the Russian-Ukrainian war, which led to the erosion of liquidity in foreign currency in the banking sector, at the same time, payments in foreign currency became greater than the proceeds flowing into the country. .
The report revealed that the current situation is likely not to be sustainable, and in extreme cases may lead to an increase in the possibility of entering into the risk of a repeated devaluation of the currency, if it is not dealt with, but it ruled out that this would happen with the presence of the International Monetary Fund program as a protection against that scenario.
The Executive Board of the International Monetary Fund approved a $3 billion financial support package for Egypt for a period of 46 months, adding that it would stimulate additional financing of about $14 billion.
The statement said that the package includes a flexible exchange rate system and strengthening social safety nets to protect the vulnerable.
The “Goldman Sachs” report expected that the Egyptian authorities would take a decisive step towards liquidating the black market, in the coming days, a step that carries risks of a significant devaluation of the pound, and the extent of the value of the devaluation will depend on the amount of resources in foreign currency available that the central bank wants to use to increase the supply in the official market. , as well as the monetary policy mechanisms that it will take to support the pound in terms of interest, compulsory reserves, and so on.
In the long term, Goldman Sachs expects the Egyptian pound to recover from any devaluation in the near term, if the authorities can commit to a reliable flexible exchange rate and take measures to increase confidence in the exchange system.
Since the beginning of this year, the Egyptian pound has been under severe pressure, especially after the wave of money exodus, which official authorities estimated at about $20 billion during the first quarter of this year. Against the backdrop of the crisis, the Central Bank of Egypt announced the devaluation of the Egyptian pound against the dollar twice, the first during an extraordinary meeting in March, and the second in October of this year.
Against the backdrop of these reductions, the dollar exchange rate jumped from 15.74 pounds at the beginning of this year to 24.66 pounds at the present time, recording an increase of 56.6%.
In the official exchange market, the exchange rates of the dollar against the Egyptian pound stabilized at the beginning of Sunday’s trading in the two largest banks in terms of assets and transactions, the National Bank and Banque Misr. The exchange rate on Sunday recorded a level of 24.64 pounds for purchase, and 24.69 pounds for sale.
In the Commercial International Bank, the price of the dollar recorded a level of 24.68 pounds for buying, and for selling, it recorded 24.75.