Dollarization .. Years of losses as the Central Bank of Egypt ended a decision

Thursday, November 3, 2016 was a turning point in the history of the Egyptian forex market, at a time when the government was forced to continue supporting the dollar in order to preserve commodity prices, forex traders continued to drain resources. in dollars in more than one way.

Due to the imaginary gains made by dollar traders during the period of 2011 to 2016, this trade spread to a large scale and the forex companies expanded their business and added more branches, and in return the reserves. The country continued to bleed with the rising import bill until the market urgently needed to Confront the currency trading and stop the import craze.

While the decision to float the Egyptian pound against the dollar and completely liberalize the foreign exchange market was not surprising, currency traders and those who control the dollarization market have tried, by several methods, to recover and recover. tighten their control in the market, but the decision of the Central Bank of Egypt came to shut down all exchange companies that deviate from the instructions, in addition to the decision of the supervisory authorities to control all merchants of currencies, so the year 2017 saw a harsh end for black market traders.

Unofficial estimates indicate that the currency black market controlled nearly 60% of total dollar transactions before the IPO, causing violent and significant losses for banks that dealers have turned away in the light. high exchange rates on the black market compared to the prices offered. by banks. . However, with the tightening of control and leaving the dollar to supply and demand and the control and rationing of imports in cooperation between the Central Bank of Egypt and the Ministry of Trade and Industry, the demand for hard currency has stabilized and the supply of dollars in banks has increased.

A set of figures prepared by Al-Arabiya.net indicates the crisis that the Egyptian economy is going through due to the spread of dollarization operations.The country’s foreign exchange reserves decreased during the period 2011-2016 by 52.5 %, losing about 18.9 billion. $, as reserves fell from the level of $ 36 billion in 2011 to about $ 17.1 billion in 2016, but it had recorded its lowest level in modern history in 2013 when it hit 13.6 billions of dollars.

Currency exchange company in Egypt

On the other hand, and since the Central Bank floated the pound against the dollar, the volume of reserves has jumped 129%, adding around $ 22.5 billion, after rising from the level of 17.5 billion. in 2016 to about $ 40.1 billion in 2020. This indicates average annual growth of about 10.5 percent with an annual increase of $ 4.5 billion. But the reserve recorded its highest level in its history in 2019, when it stood at around $ 44.5 billion.

As for the remittances from Egyptians working abroad, which is a significant figure in the volume of Egyptian foreign exchange reserves, the figures indicate that their total value during the years 2011 to 2016 was around 87 , $ 1 billion. On the other hand, during the years 2016 to 2020, it recorded around 126.3 billion dollars, which represents an increase of 45% with a value of 39.2 billion dollars.

Before the introduction of the Egyptian pound, the dollar exchange rate was 8.8 pounds, but on the first day of the IPO, the Central Bank of Egypt set a guide price at 13 pounds, which caused the dollar’s exchange rate to jump 47.7% in 24 hours. . In mid-2018, the average dollar exchange rate was around 19.60 pounds, an increase of 122.7% from its value before the IPO.

But with the start of 2019, the dollar’s rise began to fade to the 17 pound level, then continued to decline to record in the current year an average of 15.62 pounds, down more 25.4% from the highest level reached by the dollar in mid-2018.