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5 Arab countries announced that their currencies had been totally or partially “floated” over the past five years, in an attempt to remedy their financial and economic crises.
According to Anatolia, the experiences of full or partial flotation in the five countries were not encouraging, as this step had serious consequences for its citizens, especially vulnerable groups and those with low incomes.
The Lebanese have increasingly feared in recent times that the Central Bank will float the exchange rate of the pound, under pressure from the International Monetary Fund, which could lead to a further fall in the local currency and an increase in prices. price.
Egypt
Egypt was the first Arab country to abandon the fixed exchange rate of the pound against the dollar, and it completely liberalized the exchange rate, leaving pricing completely to the mechanism of supply and demand on the market.
One of the immediate consequences of the decision was a sharp drop in the pound’s exchange rate from around 8.8 per dollar to 18, which weakened the country’s foreign exchange reserves, and therefore its ability to secure commodities, most of which are imported from abroad. .
Inflation rates in Egypt rose in the months following the decision to float above 35%, at a time when Egyptian deposits denominated in local currency eroded due to falling exchange rates.
Whose
Yemen followed Egypt’s lead and fully liberalized its currency in 2017, with the aim of closing the gap between the official exchange rate, set at 250 riyals to the dollar.
As a result of this decision, the price of the local currency fell, within hours, to over 370 riyals per dollar, which is the current black market exchange rate.
Today, after almost 4 years of floating, the exchange rates of the riyal fluctuate against the US dollar, but it is on average 850 to 900 riyals in the temporary capital Aden, amid a shortage of foreign exchange.
Countries like Saudi Arabia and the United Arab Emirates have intervened with the Central Bank by pumping out dollar-denominated deposits in order to keep the riyal cohesive, but the ongoing war and lack of stability have caused the country to lose the most of the currencies.
Morocco, West, sunset
After the experiences of Egypt and Yemen in the complete liberalization of their currencies, and the popular protests that accompany it, the Moroccan government has chosen a gradual flotation of the dirham, as one of the terms of a reform program stipulated by the International Monetary Fund to provide assistance. for the country.
In 2018, the Moroccan government decided to allow the exchange rate of the dirham to have a margin of 2.5%, upward or downward, compared to a basket of euro currencies (with a 60%) and the US dollar (with a weight of 40 percent), as the first step to a full float over a 10-year period.
In March 2020, Morocco began a second phase of floating of the dirham, widening the margin of movement to 5%, upward or downward.
Morocco did not witness any serious confusion in the partial float process, as it was not a priority for the local economy, which enjoyed a certain stability in trade activities and the balance of payments, and the country’s availability of a secure foreign currency block. .
Iraq
In the second half of 2020, the Central Bank of Iraq faced a waste of foreign exchange reserves, as black market speculators took advantage of the difference between the official rate (1,183 dinars per dollar) and the market price. parallel (1490 dinars per dollar).
Under this pressure, and the pressure of international institutions, the Iraqi authorities last December, a partial float of the currency, by reducing the price of the dinar to 1460 against the dollar, with the aim of eliminating the black market.
Iraqi Finances have justified the fall in the value of the dinar, faced with the financial crisis to which the country is exposed, following the fall in the selling prices of oil on the world markets, due to the repercussions of the “Corona” virus.
And soon the International Monetary Fund announced its support for the decision to reduce the value of the Iraqi dinar against the dollar, as part of a plan for financial reforms in the country in the throes of a stifling economic crisis.
Sudan
Sudan was the last Arab country to abandon the fixed exchange rate for its national currency. Last February, the Central Bank of Sudan introduced a partial flotation of the local currency, a measure almost identical to the Iraqi measure.
Following the decision of the Sudanese Central Bank to “unify the exchange rate”, the price of the local currency fell from 55 pounds to the dollar (the official rate to date) to 370 pounds, when it reached an average of 379 pounds this week. transactions.
A Central Bank statement last month said: “The decision aims to unify and stabilize the exchange rate, transfer resources from the parallel market to the official market and attract remittances from Sudanese working there. ‘foreign”.
The decision of the Sudanese Central Bank was preceded by the unification of the exchange rate, gradually increasing the subsidy for fuel and other commodities, in application of requests from the International Monetary Fund as a condition to support the reform program of Khartoum.
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