Cash-strapped Egypt allows its currency to fall sharply against dollar

CAIRO, Mar 06 (AP): The Egyptian pound slipped sharply against the dollar on Wednesday after Egypt's central bank raised its main interest rate and said it would allow the currency's exchange rate to be set by market forces.
The measures by the Central Bank of Egypt were meant to combat inflationary waves and attract foreign investment as the country experiences a staggering shortage of foreign currency.
Following the central bank announcement, commercial banks were trading the US currency at more than 47 pounds by midday Wednesday, up from about 31 pounds per dollar.
The central bank increased the key interest rate by 600 basis points to 27.75 per cent. The overnight deposit and lending rate were also raised by 600 basis points to 27.25 per cent and 28.25 per cent respectively, the bank said in a statement.
The Egyptian economy has been hit hard by years of government austerity, the coronavirus pandemic, the fallout from the war in Ukraine, and most recently, the Israel-Hamas war in Gaza.
Cash-strapped Egypt is the world's largest wheat importer, with most of its imports traditionally coming from eastern Europe. Since January 2022, the Egyptian pound has lost around 50 per cent of its value against the dollar.
The central bank said its measures Wednesday would help end the black market in currencies and slow inflation, which reached unprecedented levels in recent months. The annual inflation rate was over 31 per cent in January, according to official figures.