Egypt will develop a new currency indicator partly to make people drop the idea that the Egyptian pound should be pegged to the U.S. dollar, the new central bank governor said on Sunday.
Hassan Abdalla, who assumed office in August, told an economic conference that the central bank was also working to start currency hedging and had already finished futures contracts as it revives its currency trading system.
The indicator would be based on a basket of various currencies and probably gold, he said. Abdalla added:
“It is for the sake of the idea of pegging — and I’m not talking about the price, I’m speaking about the idea. America is not my major trading partner. I don’t know why people are always fixated on the dollar. Part of our success will be in changing the culture and idea that we are pegged. We want to be seen against every currency.”
The Egyptian pound had been virtually fixed at around 15.70 pounds against the dollar for 18 months before Russia’s invasion of Ukraine prompted a flight of billions of dollars out of Egyptian treasuries in a matter of weeks, causing the central bank to devalue the currency in March and let it slowly plunge since then.
Egypt since March has been negotiating a financial support package with the International Monetary Fund, which has long encouraged it to assume a more flexible exchange rate. The Egyptian pound had surging against the euro, the Turkish lira, and the British pound since the conflict in Ukraine. “But people don’t see all that,” Abdalla told the conference.
Despite the currency revamp, Abdalla said the central bank’s key mission would be to curb inflation, currently running at 14%.
