Emirati and Egyptian central banks agree to a currency swap deal as Egypt's economy struggles

CAIRO (AP) — The central banks of the United Arab Emirates and Egypt agreed Thursday to a currency exchange deal, which could bolster the struggling Egyptian economy.

A joint news release said the agreement would allow the two central banks to exchange up to 5 billion Emirati dirhams and 42 billion Egyptian pounds, or roughly the equivalent of $1.36 billion.

The Egyptian pound lost more than 50% of its value against the dollar in the last 18 months, and the country is suffering from a shortage of foreign currency. Egypt, the Middle East’s most populous country, is the world's largest importer of grain. Its supplies traditionally have come from eastern Europe, so it has been hit hard by the fallout of the Ukraine war.

Last month Egypt’s annual inflation rate stood at 39.7%, more than double compared to the same month last year, when it recorded 15.3%.

Currency swap arrangements are usually deployed when nations are seeking to shore up central and domestic banks by providing them with extra liquidity in the form of a foreign currency.

"It seems again that the UAE is providing Egypt with financial support," said James Swanston, an economist specializing in the Middle East and North Africa. “Egypt's central bank needs more ammunition to prop up its currency.”

The UAE and the other gulf states have been chief backers of President Abdel Fattah el-Sissi's government since it came to power in 2013. Estimates suggest over $100 billion in Gulf money has gone to Cairo via Central Bank deposits, fuel aid and other support since then.

The heads of the Emirati and Egyptian central banks both said Thursday’s deal would enhance cooperation between the two allied countries, but gave few further details about the agreement.