Dec. 31 - With economy in critical condition after nearly two years of unrest, Egypt central bank allows the pound to slip. Lindsey Parietti reports.
Egypt's pound has hit a record low against the dollar as the country struggles to revive its economy. A new currency regime announced by the Central Bank Saturday prompted the devaluation of the pound from around 6.1 to 6.3 to the U.S. dollar. The bank had previously resisted any sharp drop during nearly two years of unrest that has crippled the economy, but it said foreign reserves were now at a critical level. Egyptians have been selling off local currency and the stock market has also taken a blow amid uncertainty over the country's political future. Prime Minister Hisham Kandil said on Sunday that the economy was fragile, adding that he expected talks with the International Monetary Fund on a $4.8 billion loan to resume in January. As the bank introduces regular currency auctions, the price of the Egyptian pound will begin to reflect supply and demand more closely. It has imposed limits and fees on foreign currency purchases to deter such transactions in the short term. Pharos Research forecast a free float with the pound weakening to 6.50 to the dollar.