CBE Prioritizes Inflation Control Over Currency Strength, Governor Says

Egypt’s Central Bank Governor Hassan Abdalla underscored that the core responsibility of the Central Bank of Egypt (CBE) is to control inflation, not to defend or target the strength of the national currency, signaling a decisive shift in the country’s monetary policy framework.

Speaking at the second edition of the AlUla Conference for Emerging Market Economies 2026, Abdalla stressed that the role of a central bank governor lies in managing monetary policy and establishing its regulatory framework, rather than attempting to fix or influence exchange rate levels.

“The objective of the central bank is not to determine the exchange rate,” Abdalla said. “Our primary mandate is to control inflation.”

Abdalla revealed that since March 2024, Egypt has formally transitioned to an inflation-targeting regime, accompanied by the implementation of a fully flexible exchange rate system, the first such move in the country’s modern economic history.

Under this system, the Egyptian pound is allowed to respond to market forces of supply and demand, marking a departure from previous managed or semi-fixed arrangements that often strained foreign reserves and distorted pricing mechanisms.

According to the governor, the adoption of flexible and responsive monetary policies has played a key role in curbing inflation, which has declined sharply, from levels approaching 40% to around 12%.

“This decline in inflation has significantly strengthened confidence in the Egyptian economy,” Abdalla noted, emphasizing that fighting inflation remains one of the top priorities for central banks globally amid ongoing economic uncertainty.

Beyond inflation control, Abdalla highlighted clear signs of recovery across Egypt’s broader macroeconomic landscape. He pointed to the gradual improvement in Suez Canal revenues, a critical source of foreign currency, alongside strengthening overall economic performance.

The governor also noted a growing role for the private sector, which he described as essential to sustaining growth and enhancing economic resilience.

“Egypt’s economy has the fundamentals and capacity needed to grow and absorb shocks,” Abdalla said, adding that recent reforms have improved the country’s ability to withstand external pressures.

In a separate session at the conference, Abdalla reaffirmed that Egypt has demonstrated an “exceptional ability” to endure successive economic shocks, despite global headwinds affecting emerging markets worldwide.

He cited record-breaking tourism figures, both in visitor numbers and spending, as well as renewed momentum in private-sector activity, as key indicators supporting a more optimistic outlook.

Looking ahead, Abdalla said the balance of risks now tilts toward upside potential rather than downside threats, with the exception of external shocks that remain beyond the control of any single economy.

“Empowering the private sector and attracting both local and foreign investment will be the main drivers of sustainable growth in the next phase,” he concluded.