Since the adoption of the structural adjustment programme, the pound has gone up and down, around and back again. Here's a quick look at the highlights: 1991 Based on IMF and World Bank recommendations, President Hosni Mubarak's government established a single exchange rate. Because of a recurring shortage of dollars in banks, however, a parallel black market continued to be the only option for many Egyptians seeking dollars. 1994 A new "foreign currency law" appears, allowing both individuals and legal entities the freedom to retain any amount of foreign currency. The law stabilised the market, and the pound settled around LE3.4 to the dollar until 1998. 1998 In November, following the Southeast Asian financial meltdown, and an increasing trade deficit, the exchange rate began fluctuating. 1999 By June, the dollar exchange rate had gone up to LE3.5, after members of the foreign exchange division at the Federation of Chambers of Commerce made a gentleman's agreement with the Central Bank of Egypt to stabilise the exchange rate at LE3.47. In September, the dollar/pound rate rose again, to a new and unexpected high of LE3.7. 2001 In January, the Central Bank of Egypt established an exchange market regulatory system -- dubbed a "managed float" -- that involved fixing a base rate using the weighted average of foreign exchange transactions over three weeks. From that central figure, the exchange rate was allowed to fluctuate within a margin of one per cent in each direction. It averaged around LE3.86 to the dollar. By August, just six months after the "managed float" system had been put in place, the Central Bank of Egypt decided to loosen its grip on the exchange rate, broadening the band of fluctuation to three per cent -- up from the previous one per cent -- or 1.5 per cent on both sides of the set rate. By then the rate had climbed to LE3.9. 2002 In January, the pound slumped to a 10-year low against the dollar, settling at LE4.25. Former prime minister Atef Ebeid announced that the Central Bank of Egypt would assume full responsibility for controlling and regulating the market. 2003 In January, Ebeid delivers the big surprise: that the pound would be free-floated. "The rate is set by the market. There will be no interference from the government -- it is a free market," Ebeid announced. In September, the government introduces a handful of protective moves, including decree 506 obliging exporters to relinquish 75 per cent of their dollar revenues to local banks. The moves mostly backfire and feverish demand eventually pushes the dollar to unprecedented highs of LE7.3. 2004 By mid year the pound shores itself up a bit, thanks to a thriving tourism sector, rising Suez Canal revenues, better exports and greater business optimism as a result of a new, reform minded cabinet. This was mirrored in a decline in the margin between the official and parallel black market dollar exchange rates. The pound is traded at an average of LE6.4. By November, the gap between the official and parallel black market rates is virtually eliminated. The dollar pound exchange rate goes down to LE6.2. 2005 In January, thanks to higher interest rates on pound accounts, and with the introduction of a dollar inter-bank mechanism, the dollar pound exchange rate goes down to LE5.9. The prospects While some analysts are predicting that the rate will go down to as low as LE5.5, others think the pound's current strength might not last.
