Egypt develops a new currency index to wean people off the dollar

CAIRO (Reuters) – The new central bank governor said on Sunday that Egypt would develop a new currency index in part to keep people away from the idea of ​​pegging the Egyptian pound to the U.S. dollar.

Hassan Abdullah, appointed in August, said at an economic conference that the central bank was also working on introducing currency hedges and had already ended futures contracts with its renewal of the currency trading system.

He said that the index will depend on a basket of several currencies and possibly gold.

“This is for the idea of ​​linkage – and I’m not talking about the price, I’m talking about the idea,” he said. “America is not my main trading partner. I don’t know why people are always so focused on the dollar.

“Part of our success will be in changing the culture and the idea that we are connected. We want to see for every coin.”

The Egyptian pound was virtually flat at about 15.70 against the dollar for 18 months before the Ukrainian crisis caused billions of dollars to flee from Egyptian treasury bonds within weeks, prompting the central bank to devalue the currency in March and allow it to weaken gradually since then.

Egypt has been negotiating since March a financial support package with the International Monetary Fund, which has long urged it to adopt a more flexible exchange rate.

The Egyptian pound has strengthened against the euro, British pound and Turkish lira since the Ukraine crisis. “But people don’t see all of that,” Abdullah told the conference.

Despite the currency’s renewal, Abdullah said the central bank’s primary task would be to control inflation, which is now 14%.

(covering) by Patrick Weir, Mahmoud Murad and Naira Abdullah; Editing by Diane Craft

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