Editing Economy of Egypt (section)

== Exchange rate policies ==
{{Further|Egyptian pound}}In the 19th century, Egypt's currency system was based on the piastre (qersh), subdivided into 40 para. Although formally equal to its Ottoman counterpart after the 1840 Turkish-Egyptian treaty, the Egyptian piastre was typically valued higher, leading to disparities in exchange, such as 10 Egyptian piastres equaling 11 Turkish piastres around the mid-19th century,.<ref name="denzelegp" /> Egypt adopted a bimetallic standard in 1834, basing its system on the [[Maria Theresa thaler]], known as ''abu taqa'' in Egypt, which was valued at 20 piastres. The 1830s saw the introduction of new gold and silver coins, yet foreign coins like the British sovereign continued to circulate at unofficial rates.<ref name="denzelegp" />{{multiple image
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The 1885 currency reform led to the adoption of the gold standard, introducing the [[Egyptian pound]] (jeneih) at E£1 = 7.4375 grams of fine gold.<ref name=denzelegp>{{cite book |last=Denzel |first=Markus A. |title=Handbook of World Exchange Rates, 1590–1914 |chapter=Egypt (1869–1914) |publisher=Routledge |year=2010 |pages=599–607 |isbn=9780754603566 |url=https://www.taylorfrancis.com/chapters/mono/10.4324/9781315253664-53/egypt-1869%E2%80%931914-1-markus-denzel}}</ref><ref>{{cite web |url=https://en.wikisource.org/wiki/Page:Statesman%27s_Year-Book_1899_American_Edition.djvu/1478 |title=Statesman's Year-Book 1899 American Edition – page 178 |website=en.wikisource.org |date=1899 |access-date=2022-07-03 |archive-date=2022-07-03 |archive-url=https://web.archive.org/web/20220703083120/https://en.wikisource.org/wiki/Page%3AStatesman%27s_Year-Book_1899_American_Edition.djvu/1478 |url-status=live }}</ref> Pegged to the [[British gold sovereign]], it maintained an exchange value of 97.5 piastres per pound sterling, replacing the Egyptian piastre (qersh) as the primary currency unit.<ref name="denzelegp" /> This reform standardized foreign exchange rates by law and adjusted the [[Maria Theresa thaler]] to 21 piastres, while 20 piastres equaled 5 French francs.<ref name=denzelegp/>

With the outbreak of [[World War I]], Egypt abandoned the gold standard and pegged its currency to the [[British pound]] at a fixed rate, which remained until 1962 when it shifted to the [[U.S. dollar]].<ref>{{cite news | url=https://www.entrepreneur.com/en-ae/news-and-trends/the-impact-of-egypts-currency-devaluation-on-its-local/476269 | title=The Impact Of Egypt's Currency Devaluation On Its Local Startups | date=28 June 2024 | access-date=27 February 2025 }}</ref> In 1969, Egypt adopted a multiple exchange rate system to address two key challenges.<ref name=exchangerate>{{cite web |url=https://erf.org.eg/app/uploads/2017/04/Mohieldin_Kouchouk.pdf |title=ON EXCHANGE RATE POLICY: THE CASE OF EGYPT 1970-2001|last=Mohieldin |first=M. |last2=Kouchouk |first2=A. |publisher=Ministry of Foreign Trade |date=December 2002 |access-date=1 March 2025}}</ref> It helped mitigate the negative effects of an overvalued currency on external competitiveness while also managing the country's heavy reliance on workers’ remittances.<ref name=exchangerate/>

By the 1980s, external shocks, including declining oil prices and rising debt, exposed the vulnerabilities of Egypt's economy. The government attempted exchange rate liberalization in 1987, reducing multiple exchange rates from five to three, implementing a gradual devaluation, and establishing a free exchange market. However, these measures proved insufficient due to Egypt's continued dependence on external revenues from oil, the [[Suez Canal]], and remittances, and by the early 1990s, Egypt faced mounting fiscal deficits, inflation, and a [[balance of payments crisis]]. In response, the Economic Reform and Structural Adjustment Program was launched in 1991, backed by the [[IMF]] and [[World Bank]]. This program sought to unify exchange rates, liberalize trade, and reduce state intervention. The Egyptian pound was pegged to the U.S. dollar, supported by tight fiscal policies and high-interest rates. While this approach stabilized inflation and attracted capital inflows, it led to a gradual overvaluation of the currency, reducing competitiveness and straining foreign exchange reserves.<ref name=exchangerate/>

The late 1990s and early 2000s saw growing pressure on the fixed exchange rate system due to external shocks, including the [[1997 Asian financial crisis]] and declining oil prices.<ref name=exchangerate/> By 2003, Egypt adopted a [[managed float]], allowing greater currency flexibility while still maintaining central bank interventions.<ref>{{cite web |title=Should MENA Countries Float or Peg?|author=Abdelali Jbili and Vitali Kramarenko|date=March 2003 |publisher=International Monetary Fund |url=https://www.imf.org/external/pubs/ft/fandd/2003/03/jbil.htm |access-date=1 March 2025}}</ref> However, persistent trade imbalances and political instability following the [[Egyptian Revolution of 2011|2011 revolution]] led to renewed currency pressures. A foreign exchange black market sprung up, and by 2016, Egypt was forced to implement a full float of the pound under an IMF-backed reform program. The sharp devaluation that followed improved Egypt's external balance but also led to inflationary pressures.<ref>{{cite news | url=https://www.nytimes.com/2016/11/04/world/middleeast/egypt-currency-pound-float-imf.html | title=Egypt Floats Currency, Appeasing I.M.F. at Risk of Enraging Poor | date=3 November 2016 | access-date=1 March 2025 }}</ref>

Despite claims by the [[Central Bank of Egypt]] that the currency remained free-floating, reports indicated that by 2018 the central bank was actively using state-owned banks to manage the pound’s value, effectively returning to a controlled exchange rate.<ref name=exchangerate2>{{cite news | url=https://timep.org/2022/06/07/egypts-next-imf-loan-how-to-avoid-the-failures-of-the-past-six-years/ | title=Egypt’s Next IMF Loan: How to Avoid the Failures of the Past Six Years | date=7 June 2022 | access-date=1 March 2025 }}</ref> During the [[COVID-19 pandemic]] the country faced increasing pressure to allow further currency depreciation, skepticism grew over the long-term sustainability of these measures and their implications for economic stability.<ref name=exchangerate2/>

The [[COVID-19 pandemic|pandemic]] severely impacted the country's primary sources of foreign currency, particularly tourism and the oil and gas industry.<ref name=exchangerate3>{{cite news | url=https://www.trade.gov/market-intelligence/egypts-foreign-currency-crisis | title=Egypt’s Foreign Currency Crisis | date= | access-date=1 March 2025 }}</ref> Although both sectors began recovering in 2022, they struggled to return to pre-pandemic revenue levels by 2023 when the outbreak of [[Russia-Ukraine war|war in Ukraine]] further strained Egypt's economic position, as Russian and Ukrainian tourists, who form a substantial portion of Egypt’s visitor base, were largely absent.<ref name=exchangerate3/> Additionally, the conflict led to sharp increases in global commodity prices, particularly wheat, which Egypt imports in large quantities. These factors contributed to a broader [[currency crisis|economic crisis]] characterized by a resurgence of the black market due to a shortage of U.S. dollars and other hard currencies.<ref name=exchangerate3/>

In 2024, Egypt addressed its latest [[currency crisis]] by floating the pound once again, abandoning both implicit and tacit measures to support the currency.<ref name="intro1"/> This lead to a depreciation of nearly 40% and a was followed by a record 600-basis-point interest rate hike. These measures facilitated an expanded $8 billion [[IMF]] loan, part of a broader $20 billion support package from [[European Union]], the [[World Bank]], [[Japan]] and the [[UK]].<ref name="intro1"/> The currency stabilized and investor confidence improved, with Moody’s upgrading Egypt’s credit outlook and local stocks rallying. A pivotal element in this recovery was Egypt’s $35 billion investment deal with the [[UAE]] for the development of [[Ras El Hekma]], the largest foreign investment in the country’s history.<ref name="intro1"/>