Egypt’s Foreign Currency Crisis

Egypt is experiencing an economic crisis that has resulted in fewer U.S. dollars and other hard currencies available in the market. From 2020 – 2022, the COVID-19 pandemic negatively impacted Egypt’s two largest foreign currency generators—tourism and the oil and gas sector. Both started to rebound in 2022, but in 2023 both sectors are struggling to regain their pre-COVID revenue. The more recent and ongoing war in Ukraine also negatively affected Egypt’s tourism sector as Russians and Ukrainians typically make up a significant portion of Egypt’s repeat tourists. The war also negatively impacted prices for key commodities, such as wheat, which Egypt relies on heavily to feed its 100+ million population. 

In January 2023, the Central Bank of Egypt devalued the Egyptian Pound (EGP) for the third time, resulting in a loss of approximately 40 percent of its value reaching 31 pounds per 1 U.S. dollar from official sources and approaching 40 pounds per 1 U.S. dollar in the parallel markets. 

The devaluation of the local currency, higher U.S. interest rates, and high domestic inflation make it difficult for Egyptian buyers to meet their financial obligations. Most of these companies have worked closely with their U.S. company partners for many years with minimal problems. However, in 2023, the number of U.S. companies that contacted the U.S. Foreign Commercial Service in Cairo for assistance with non-payment issues more than quadrupled. 

A lack of foreign currency led to tough banking requirements to finance imports. This issue has destabilized trade and made it hard to import raw materials and machinery. To import goods, the importer must request either:

• Letters of credit take time and require several approvals to guarantee the foreign currency that covers the operation.
• Collection documents that allow the importer to release the goods and have delayed payment terms.

For more information, please contact Dina Bissada.