Egypt’s Exchange Rate Regime Policy after the Float

Abstract

The major purpose of this paper is to analyze the actual exchange rate policies followed by Egypt since the Central Bank of Egypt (CBE) announced its adoption of a floating ER regime in January 2003.

Based on our analytical and empirical approaches to analyzing the actual degree of flexibility of exchange rate policies we concluded the following. First, the de jure “Free Floating” ER Regime that the CBE announced in January, 2003 was not preserved during the period of the study. Second, the changes in the IMF’s de facto classifications of Egypt’s actual exchange rate policies were broadly accurate. Third, the move from light to heavy exchange market management in 2011 leads to what has been called a one way speculative option. Fourth, too much attention has been paid to the US dollar in setting exchange rate policies. Since the dollar exchange rate sometimes moves substantially against some of these other currencies such as the Euro, it is important that such fluctuations should also be taken into account.