Egypt joins the party in removing currency peg

The Central Bank of Egypt moved swiftly to implement economic reforms in order to meet the required conditions set out by the International Monetary Fund that could secure a much needed $12 billion in loans from the organisation to ease the nation's woes following a suppressive period of political instability that's brought on interruption in key sectors within the economy, causing the necessitating flow of growth to be halted.  

Perhaps the most notable reform involves the peg on the country's currency, the Egyptian Pound, being scrapped in favour of a floating currency to facilitate the temptation of foreign investors to external funding to it's shores and replenish the gaping hole found in the nation's reserve's that's seemingly making it difficult for government to work around the depletion of funds to pay for essential imports.  

This move follows closer on the back of the Central Bank of Nigeria's decision to remove the peg on it's currency, the Naira, against the US Dollar based similar grounds to their northern neighbours.

Both countries have risen and fallen out the ranks of top African economy a number of times in the past few months with many economists saying the current economic situation is merely temporary and expect to see their respective economies to revive themselves after introducing these measures.  

Egypt jacks up rates by 300 bps and floats the currency. Massive https://t.co/DDIp5lQJRH

— David Ingles (@DavidInglesTV) November 3, 2016

At the time when Nigeria made the transition from a fixed exchange to a floating one I had said the move was a good decision and showed the economic policy maturity needed to accelerate the progression of its economy. I also said that we couldn't expect short term relief from it's implementation and stressed the importance of more being done to attract longer term funding.

My view would stay the same in the case of Egypt and probably any other country that applies a fixed rate exchange rate to it's currency. The interconnectedness of the world as a result of globalisation has meant the flow of capital is allowed the freedom to find its way into economic systems outside its borders.

In saying this, the quickness in expansion of monetary supply from major economies at low interest rates for an extended period has meant capital flight in exchange for return has effectively toppled over a once practical solution to control the trade between countries.

Furthermore its influential nature to promote the free market in economies where large inefficiencies had taken place essentially means the world is moving towards an openness in the dynamics of supply and demand where price is matched up against the scarcity of quantity.

Perhaps there are some advantages to Quantitative Easing ...