CAIRO, Nov 3 (Aswat Masriya) - The International Monetary Fund (IMF) welcomed Egypt's decision to float the national currency on Thursday, saying that it will improve the country's external competitiveness.
In what several commentators called a "historic move", the central bank informed the banking community Thursday morning of its decision to float the pound.
The central bank set a provisional rate of EGP 13 to the dollar before its exceptional auction which took place at 13:00 Cairo time.
The central bank sold $100 million at the exceptional auction, and is expected to sell up to $4 billion later today, according to sources in the Egyptian banking sector.
The currency is left to float freely after the sale.
"The flexible exchange rate regime, where the exchange rate is determined by market forces, will improve Egypt’s external competitiveness, support exports and tourism and attract foreign investment," IMF Mission Chief for Egypt Chris Jarvis said in a statement.
"All of this will help foster growth, job creation and stronger external position for the country," he added.
The decision came in the context of the government's economic reform programme that aims to reduce the budget deficit and the public debt, according to the central bank's press release on Thursday.
Egypt is waiting for approval by the International Monetary Fund's board of a three-year loan program. In return, Egypt is required to carry out economic reforms, including a devaluation of the pound and painful subsidy cuts.
With more subsidy reforms still expected, particularly energy subsidies, Egypt is seen as close to sealing the deal with the IMF after Thursday's decision.
Foreign reserves have reached $19.59 billion at the end of Sept., the highest in over a year but still more than 40 per cent below levels before the January 2011 uprising.