CEM REPORT, FINANCE | United Arab Emirates and Egypt have agreed to a currency exchange deal worth around $1.4 billion as a needed measure to help the North African country save its struggling economy.
According Aljazeera, citing a joint news release on Thursday, the agreement would allow the two central banks to exchange up to five billion Emirati dirhams and 42 billion Egyptian pounds, or roughly the equivalent of $1.36bn.
This move is now very necessary as the economy of Egypt is struggling to keep its currency up with the Egyptian pound losing more than 50 percent of its value against the dollar in the last 18 months. The country’s central and domestic banks need to be provided with extra liquidity while scaling down its dependence on the dollar.
The North African country is suffering from a shortage of foreign currency forcing the currency to reach a historic low of 32 Egyptian pounds to the dollar in January before bouncing slightly back to the current 30.90.
Egypt Annual inflation hit a record high of 39.7% in August.
According to Aljazeera, the crises in Ukraine has affected major food import and leading to shortage of imported products. Basic foods, such as eggs and cooking oil, have doubled in price.
“The country is in free fall,” said a customer at a popular street café in Cairo. Efforts to mitigate the situation have exacerbated, at least temporarily, the problem.
This currency swap is considered as another financial support from the UAE to Egypt. The UAE and the other Gulf states have been chief backers of President Abdel Fattah el-Sisi’s government since it came to power in 2013.
Estimates have suggested more than $100bn in Gulf money has gone to Cairo via Central Bank deposits, fuel aid and other support since then.