While devaluation can appear to be catastrophic, there are many opportunities and potential benefits to the Egyptian pound. The measurement of the relative value of a currency against another is just one indicator, and there are many more complicated factors at work as shown by the examples of devaluation in other countries.
For foreign consumers, exports for the country are available to a more competitive price. This means that Egypt could expect to sell a much higher volume of goods, which may ultimately result in higher profits and balance of trade.
For Egyptian residents, the devaluation of their currency is a sign that there are few inflationary pressures, ensuring price stability and a more certain environment for business as well as for households. This is a good sign for families and workers in Egypt, as they do not face uncertainty in the price of the regular goods they use every day. This also reflects the policy of encouraging price stability of the CBE.
Recommendations for the government of Egypt are to continue to take advantage of the competitive position on the world market with regard to the devalued currency, and to support Egyptian businesses by facilitating their increase in export capacity. There are many products which are sold from Egypt on the worldwide market, but many more businesses have yet to approach foreign sales and export. Streamlining regulatory barriers to exports is one way to do this, funding or training programs that provide incentives and knowledge of process to Egyptian business owners is another potential approach. By increasing the number of Egyptian businesses that participate in exporting goods to foreign countries, the country bolsters its position in the world market. A further impact is that regular supplier relationships are formed which increase the volume of trade for years to come. Overall these pressures can seem dire but they are likely to have an overall positive impact if it increases incentives and motivation to export at the individual business and regulatory levels.
One issue which has wide impacts with regard to any strategy to reduce imports and increase exports in the context of devalued currency is the need to import energy products. Oil and gas become more expensive and many production requirements include the need for petroleum. The government might consider ways to mitigate this for producers and manufacturers in Egypt, either by providing a subsidy for energy or by supporting and promoting new technologies based on green energy.
For Egyptian households, the advice is to buy local and nationally sourced products in order to avoid higher prices due to currency exchange. If Egyptians were to follow this advice, import demands would decrease, further increasing the balance of trade to the import side while ensuring reasonable prices for Egyptians- providing raw materials do not come from abroad.
Unfortunately, if the export volume is successfully increased, at a certain point this will add strength to the Egyptian pound, by increasing demand and putting upward pressure on prices. In the end, it is inevitable in any successful strategy such as that described that the currency will rise in value at the cause of the increased export market.
Egyptians need not panic with regard to the devaluation of their currency, for there are many potential advantages, particularly if the government uses its capacity to support business, exports and green energy not based on oil and gas. The opportunity for the nation is in the promotion of exports of Egyptian companies who are new to the world markets and able to benefit from the price advantage they can offer consumers due to devaluation.