Egypt's economy has finally started to see signs of recovery
Has Egypt's economy finally started to recover after the fall of President Mubarak where the new lift in currency transfer limits announced on Wednesday 14th June will be the test.
Early this year Egypt faced a major dilemma over its currency policy. The announcement to float' the Egyptian Currency was thought at the time to help the Egyptian Pound but it seemed to merely devalue it against all other foreign currencies. At the time, Egypt abandoned its currency fix of 8.8 pounds per dollar, which resulted in the pound halving its value and the inflation sky rocketing.
Floating Currencies vs Fixed Currencies
A floating currency rate is where the currency price is set by the market solely balancing on supply and demand compared with the other foreign currencies. A fixed currency rate is where the government of the country determines the exchange rate itself.
On Wednesday, June 14, 2017, the Central Bank of Egypt announced it was to remove limits on international currency transfers. This would include the $100 thousand limit on individual transfers abroad and the $50 thousand limit on monthly deposits on imports.
These limits were set in place on February 13th, 2011 to try and limit the loss of capital after the January 25 revolution left the country and economy in a dire state. It drove away tourists and foreign investors which were Egypt's major sources of income.
Need a refresher on the January 25 Revolution? Here's what you need to remember.
Across all of Egypt on January 25th, 2011 a revolution started as a statement against increasing police brutality during the presidency of President Hosni Mubarak. There were demonstrations, marches, occupations of parks and plazas in many major cities and many acts of civil disobedience. Protestors of all ages, socio-economic backgrounds and religions gathered together to fight their side of the tension and as a result, there were violent clashes between all security forces and the protestors. This resulted in 846 people killed and an estimated 6,000 injured across all cities. As a result of this unrest on February 11th, 2011 then Vice President Omar Suleiman announced that Mubarak would resign his position of the country's president. This revolution caused major disruption in the economy of Egypt.
The move to remove the transfer limits came about as a part of a twelve billion dollar International Monetary Fund Programme put together in November 2016 which granted Egypt a twelve billion dollar loan over three years. The loan was a response to the countries growing economic crisis and public discontent. At the time, the programme was set to create more jobs, get the public debt on a downward path, and restore the countries competitive edge while protecting vulnerable people. In November 2016, the Central Bank of Egypt took many steps forward including floating the Egyptian Pound against all other foreign currencies.
A statement from the bank said the move was to "strengthen confidence in Egyptian Economy" and hopes to attract more investment from overseas as there will be a restriction on money movement. The bank hopes that these steps forward will allow the rest of the world and its people to regain trust in the country's economy.
We can only wait to see moving forward what these changes do to help Egypt make a comeback after its currency falling in value and investors fleeing from their banks.