CAIRO — The central banks of Egypt and the United Arab Emirates signed a currency swap agreement worth $1.36 billion late last month that could provide Cairo with a lifeline in its dire financial crisis. Few details have been made public, but the arrangement will give Egypt access to up to 5 billion Emirati dirhams ($1.36 billion) in exchange for 42 billion Egyptian pounds ($1.36 billion).
Since the onset of the Ukraine war in early 2022, Cairo has been grappling with a hard currency shortage, largely caused by a massive capital flight and its difficulties in accessing capital markets, that is complicating its ability to cover its import bill and debt obligations. The Egyptian pound is also experiencing great instability and has been devalued three times since March 2022, losing about half of its value against the dollar.
Hany Abou el-Fotouh, director of the Alraya consulting firm, told Al-Monitor that the deal is promising. “For Egypt, the currency swap deal will provide a buffer against external shocks and help it to maintain financial stability. It is particularly timely given the current global economic uncertainty, which has put pressure on many economies, including Egypt,” he said.
The currency swap agreement will give Egypt some respite from its hard currency crunch and relieve some of the pressure on its foreign reserves by allowing it to finance trade with the UAE with its local currency instead of dollars.
