The Egyptian Pound (EGP) Explained: How It Works, Types, and Examples
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Summary:
The Egyptian pound (EGP) serves as the official currency of the Arab Republic of Egypt, with the symbol E£. Initially linked to precious metals, it transitioned to a free float in 2016, significantly affecting its exchange rate with the U.S. dollar. This article delves into the history of the EGP, its connection with the Central Bank of Egypt, and its unique denominations. Additionally, it explores the impact of the EGP’s free float on Egypt’s economy and offers insights into trading the currency. Learn more about the Egyptian pound’s journey and its place in the global currency market.
What is the Egyptian pound (EGP)?
The Egyptian pound (EGP) stands as the official currency of the Arab Republic of Egypt, designated by ISO 4217, the international standard for currency codes. The symbol for the Egyptian pound is E£, but it can also be represented as LE, which stands for “livre égyptienne” in French, translating to Egyptian pound. Interestingly, the EGP is used unofficially in the Gaza Strip and some parts of Sudan.
As of September 20, 2021, one EGP is valued at approximately $0.064 U.S. dollars (USD).1
Understanding the Egyptian pound (EGP)
The Egyptian pound (EGP) was introduced in 1834, replacing the Egyptian piastre. Initially, it followed a fixed-rate bimetallic standard based on gold and silver. The piastre continued to circulate as a 100th portion of the pound, effectively becoming a one-cent coin. In 1916, the coin was further divided and renamed the millimes.2
EGP was initially linked to the bimetallic standard of gold and silver and later to the British pound sterling (GBP) until 1962. Egypt established its central bank in 1961, with the Central Bank of Egypt, located in Cairo, becoming the monetary authority responsible for regulating the circulation of the Egyptian pound.2
In 1962, Egypt altered the pound’s valuation by pegging it to the USD. Over the years, the Egyptian pound saw devaluations, both in conjunction with the USD in 1973 and independently in 1978. The currency remained partially pegged to the dollar until 2016, when the government decided to allow it to float freely, leading to a significant depreciation in its value.3
The Central Bank of Egypt and the EGP
To combat the devaluation of the EGP, the Central Bank of Egypt initiated a managed float in 2001, which continued until 2016 when the bank opted for a free float. This decision resulted in a substantial drop in the currency’s value.
After the central bank’s move to float the currency, the EGP depreciated by 32.3% and continued to weaken. The bank also raised interest rates by 300 basis points to combat anticipated inflation.4
In 2016, Egypt transitioned its currency to a free-floating system to secure a $12 billion bailout loan from the International Monetary Fund (IMF).5
Before the free float, a U.S. dollar was equivalent to 8.8 Egyptian pounds.4 Following the unpegging, the value of a dollar soared to approximately 15 Egyptian pounds. As of September 20, 2021, one USD is worth 15.7 Egyptian pounds.1
Other names for the Egyptian pound (EGP)
Egyptian banknotes feature both English and Hindu-Arabic numerals on one side and Arabic texts with Eastern Arabic numbers on the other. Egyptians have various colloquial nicknames for different denominations of the pound:
“Baku,” or “pack,” for 1,000 EGP notes.
“Arnab,” or “rabbit,” for 1,000,000 EGP banknotes.
“Feel,” or “elephant,” for 1,000,000,000 EGP bills.6
In 2011, Egypt introduced 50 piastre and 1 pound coins, featuring the faces of Cleopatra and Tutankhamun. Banknotes for these denominations were phased out; however, due to coin shortages in 2016, Egypt reintroduced the notes.7
“Arnab,” or “rabbit,” for 1,000,000 EGP banknotes.
“Feel,” or “elephant,” for 1,000,000,000 EGP bills.6
In 2011, Egypt introduced 50 piastre and 1 pound coins, featuring the faces of Cleopatra and Tutankhamun. Banknotes for these denominations were phased out; however, due to coin shortages in 2016, Egypt reintroduced the notes.7
Egypt’s economy
Egypt, an ancient country situated on the Mediterranean, boasts a rich history characterized by the development of writing, agriculture, and organized religion and government. Egypt was under Ottoman and British rule until it declared itself a republic in 1953. The nation’s involvement in regional conflicts, including those in Yemen, the Sinai Peninsula, and the Gaza Strip, has had adverse effects on its economy and people.8
The economy of the Arab Republic of Egypt relies on agriculture, petroleum, and tourism, with significant disparities in income distribution. The COVID-19 pandemic had a severe impact on Egypt’s economy, particularly in the tourism sector, which witnessed a substantial decline in revenue, generating $1.8 billion between July and December 2020 compared to $7.2 billion during the same period in 2019.9
In response to the economic challenges posed by the COVID-19 pandemic, interest rates were reduced. Nevertheless, Egypt maintains one of the highest real interest rates globally, which has aided in selling treasuries and protecting the currency but discouraged borrowing.9
A significant issue emerged as high inflation emerged after Egypt implemented austerity measures to receive financial assistance from the IMF. Actions like raising fuel prices, imposing additional taxes on tobacco, and devaluing the currency led to inflation surging to 33% in July 2017.1011
How to trade the EGP
To engage in EGP forex trading, you need a brokerage account that permits currency pair trading with EGP. Once you have an account, you’ll be required to transfer funds and download a forex trading platform.
Various trading strategies can be applied when trading EGP, similar to other currencies. These strategies encompass day trading, swing trading, and position trading. For instance, if you anticipate an increase in the USD/EGP currency pair, you can purchase a specific dollar amount of the pair. If the currency pair currently stands at 20 and rises to 20.2 after two months, you can sell your entire purchase for a profit.
Frequently asked questions
How strong is the Egyptian pound?
The Egyptian pound is considered a relatively strong currency, although it is not on par with the dollar, euro, or pound sterling. It is classified as an emerging market currency, but in 2020, it outperformed its peers against the dollar.12
Is the Egyptian pound pegged to the dollar?
No, the Egyptian pound is not pegged to the dollar. It was pegged to the dollar starting in 1962 until the government decided to allow the currency to float freely in 2016.
How do you convert the EGP to dollars?
Physically converting one currency to another can be done at currency exchange counters, many of which are available at airports. Banks also offer currency exchange services. To mathematically convert EGP to dollars, you can multiply the EGP amount by 0.064, as 1 EGP is equivalent to 0.064 dollars.
How many Egyptian pounds to the British pound?
As of September 20, 2021, there are 21.47 Egyptian pounds to the British pound.13
How many Egyptian pounds to the euro?
As of September 20, 2021, there are 18.44 Egyptian pounds to the euro.14
Is the Egyptian pound widely accepted outside Egypt?
While the Egyptian pound is the official currency of Egypt, it’s not typically accepted for transactions outside of the country. When traveling, it’s advisable to exchange your Egyptian pounds for the local currency of the destination you’re visiting.
Can I use U.S. dollars or other foreign currencies for everyday transactions in Egypt?
In Egypt, it’s common to use Egyptian pounds for everyday transactions. While some tourist areas may accept U.S. dollars or euros, it’s best to have Egyptian pounds on hand for local purchases and services.
Are there restrictions on the amount of Egyptian pounds I can bring in or take out of Egypt?
Egypt doesn’t impose strict limits on the amount of Egyptian pounds you can bring in or take out of the country. However, you should be prepared to declare larger sums at customs, and it’s essential to comply with the regulations of your home country regarding the export of currency.
Key takeaways
- Egypt’s official currency is the Egyptian pound (EGP), denoted by the symbol E£. Historically, the EGP has been associated with precious metals.
- There was a significant devaluation when the Central Bank of Egypt switched the EGP to a free float in 2016.
- One US dollar was worth 8.8 Egyptian pounds prior to the free float, but after the changeover, it was worth roughly 15 Egyptian pounds.
- The EGP has vernacular names for different denominations and is also used informally in places like the Gaza Strip and Sudan.
- Egypt’s economy is based mostly on tourism, petroleum, and agriculture; however, the COVID-19 pandemic and income inequality have a negative impact on these industries.
- Austerity measures raised concerns about high inflation, which resulted in price increases and currency devaluation.
- A brokerage account is required in order to trade the EGP using tactics such as position trading and day trading on currency pairs.
- The value of the Egyptian pound fluctuates over time and is regarded as an emerging market currency since it is not fixed to the US dollar.
- For local transactions, visitors to Egypt should carry Egyptian pounds. Although some locations could take international currencies, it’s best to use the local currency.
- Egyptian banknotes have security features that prevent counterfeiting, and travelers can exchange their Egyptian pounds for other currencies before departing the country.
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