Egypt floated the country's pound today as part of a raft of reforms, after a dollar crunch and exorbitant black market trade threatened to grind some imports to a halt.
The government of President Abdel Fattah al-Sisi is rolling out an austerity programme and seeking billions in support from abroad in order to meet conditions for a USD 12 billion loan from the International Monetary Fund.
Floating the pound had long been among a list of measures demanded by investors and international creditors.
Today's decision by the Egyptian Central Bank came as a surprise, after officials had said they would only consider floating it once foreign reserves reached USD 25 billion, up from September's USD 19.6 billion.
The bank said in a statement it had moved to a "liberalised exchange rate... To create an environment for a reliable and sustainable supply of foreign currency."
Egypt has struggled to boost its foreign currency reserves in the political and economic turmoil following the January 2011 uprising that toppled former ruler Hosni Mubarak.
The central bank's move follows comments last week from IMF chief Christine Lagarde claiming Egypt was undergoing a currency "crisis" and suggesting a quick devaluation to tackle a widening gap between the official and black market rates.
Following today's announcement, the dollar was trading on official markets at between 13.5 and 14 Egyptian pounds, according to several banks contacted by AFP.
On the black market this week the dollar was trading at a historic high of 18 pounds before losing its value amid speculation of a devaluation.
Importers and businesses had been forced to resort to the black market for dollars, with the high prices making their businesses increasingly unfeasible.
The bank's decision should help undercut the black market trade and ease access to dollars, said Mohamed Abu Basha, an economist with EFG Hermes investment bank.
"We should start to see money migrating from outside the banking system to the banking system," he told AFP.
"In a few months we should expect to see a start of a recovery in economic activity," he added.
The country's foreign currency reserves of USD 19.6 billion in September were than 50 per cent below the level in early 2011.
Much of the money went to propping up the pound against the dollar with incremental devaluations well short of the rates offered by the black market, increasingly the only recourse for importers.
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