Egypt to develop new currency indicator to wean people off U.S. dollar

CAIRO – Egypt will develop a new currency indicator partly to wean people off the idea that the Egyptian pound should be pegged to the U.S. dollar, the new central bank governor said on Sunday.

Hassan Abdalla, appointed in August, told an economic conference that the central bank was also working to introduce currency hedging and had already finished futures contracts as it revamps its currency trading system.

The indicator would be based on a basket of several currencies and possibly gold, he said.

“It is for the sake of the idea of pegging — and I’m not talking about the price, I’m speaking about the idea,” he said. “America is not my major trading partner. I don’t know why people are always fixated on the dollar.

“Part of our success will be in changing the culture and idea that we are pegged. We want to be seen against every currency.”

The Egyptian pound had been virtually fixed at about 15.70 pounds against the dollar for 18 months before the Ukraine crisis triggered a flight of billions of dollars out of Egyptian treasuries in a matter of weeks, prompting the central bank to devalue the currency in March and let it gradually weaken since then.

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

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

Despite the currency revamp, Abdalla said the central bank’s primary mission would be to get inflation, now running at 14 percent, under control.