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Although last Marchs devaluation helped partially correct the
overvaluation of the Egyptian pound, it resolved nothing in terms of 5 1
foreign currency liquidity. The devaluation was too small to have a
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real impact on Egyptian foreign trade: the pound was devalued by 2010 2011 2012 2013 2014 2015 2016
only 13%, even though the spread with the parallel market was Sources: ECB, BNP Paribas
more than 20%, and barely offset average annual price inflation.
Most importantly, foreign reserves were too small to meet foreign months of imports of goods and services. The devaluation triggered
currency demand and to unify the forex market. Although the central a significant increase in Egyptian exports. In volume terms, exports
bank needed an estimated USD 25 bn, it only had a little more than rose 15% on average between 2004 and 2008, and by 27% in value
USD 16 bn on hand, and consequently had to continue rationing terms over the same period. Foreign reserves also doubled over this
foreign currencies. The absence of a liquidity shield and an overly period to USD 31 bn at year-end 2008. Despite these positive
timid devaluation of the pound failed to send international investors trends, the devaluation apparently did not enable the Egyptian
a strong signal, and they stayed out of the market. economy to make sustainable competitiveness gains.
2003 devaluation: hydrocarbons buoy exports A large part of this export growth was due to a big increase in
In 2003, the Egyptian pound was devalued by 15% against the hydrocarbon exports. Gas exports rose 45-fold in volume terms
dollar at a time when foreign currency liquidity was relatively between 2003 and 2006, largely offsetting the decline in oil exports.
comfortable: CBE foreign reserves were equivalent to more than 8 All in all, hydrocarbon export volumes increased 27% on average
between 2004 and 2006. The increase was even bigger in value