Egypt

Egypt moved gradually from a command economy to a more market economy, in monetary and financial as well as other areas, with exchange rate controls giving way to loose exchange rate targeting followed by a heavily managed float, but recurring liberalisation-stabilisation packages were sent astray by policy slippages, and the longstanding aim to move to inflation targeting remained unrealised.

Years

Targets and attainment

Classification

1974-76

multiple exchange rates; banking system almost entirely nationalised, directed to finance state-determined investments; monetary policy instruments direct

multiple direct controls MDC

1977-91

multiple exchange rates frequently changed and adjusted, never quite unified; halting moves from command economy of 1960s and early 1970s towards more market economy, but monetary instruments remain mostly direct, forex markets heavily controlled; major entry of small mainly foreign banks; recurring fiscal dominance; rising dollarisation

unstructured discretion UD

1992-2002

exchange rate finally unified and pegged de facto to USD (but depreciations 2000-01); monetary instruments become mainly indirect and policy focused on exchange rate stability

loose exchange rate targeting LERT

2003-23

exchange rate formally floated but more or less heavily managed; monetary instruments indirect; central bank has some more autonomy, but recurring monetary financing of high budget deficits; medium-term plan is to move towards inflation targeting, but crucial steps (including genuine exchange rate float) never quite taken, continued reliance on reserve money targeting; major new reform programme November 2016 supported by IMF, with forex liberalised, exchange rate depreciated, and aims to strengthen central bank independence and eventually move to formal inflation targeting; very wide, initially high and converging informal inflation targets poorly attained; exchange rate becomes more stable versus USD from mid-2017; 2019 plans for improved central bank autonomy and move to operations based more on interest rates, but monetary transmission poor (e.g. interbank rate outside policy rate corridor); less severe impact from Covid-19 than in some countries, but strong impact from Ukraine war 2022; sharp depreciations March and, within wider stabilisation package, October 2022: some slippages e.g. return to exchange rate stabilisation early 2023, but exchange rates unified early 2024

loosely structured discretion LSD

Selected IMF references: RED 1975 section IV.1 and pp47-8; RED 1978 section V.1 and pp42-6; SR 1989 2-4, 24-8; RED 1992 pp33-4, 47-52; SR 1992 pp17-18; RED 2000 section IV.B; SR 2005 pp13-15; SR 2006 pp14-16; SR 2015 p10; SI 2018 pp38-44; SR 2018 pp18-20; 4th Review under EFF… January 2019 pp9, 47-50; 1st review under SBA… December 2020 pp7, 8-9; 2nd review under SBA… June 2021 pp12-14, 72-3; Ex Post Evaluation under SBA… June 2022 pp14-19; Request under EFF… December 2022 pp5-9, 11-13; 1st and 2nd Reviews under EFF… March 2024 pp1-2, 6-7, 12-13, 60-3.

Additional sources: Selim (2011); Al-Mashat (2011); Central Bank of Egypt, The Inflation  Targets, at https://www.cbe.org.eg/en/monetary-policy/inflation-target (accessed 13.8.24).

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