Hassan Abdalla, Governor of the Central Bank of Egypt (CBE), said monetary and banking stability is a key gateway to investment, higher productivity and greater confidence in the economy, allowing the private sector to operate and expand. He stressed that price stability and exchange-rate flexibility top the central bank's priorities.

Speaking at sessions of the "Egypt Forum 2026", Abdalla explained that the central bank's role covers monetary stability and the related issues of inflation, interest rates and the exchange rate, as well as the soundness of the banking system and the promotion of financial inclusion. He said imbalances in these areas hold back economic activity and limit its capacity to grow.

He noted that a flexible exchange rate means it moves both up and down, and that these movements are no cause for panic, since they are part of how a flexible regime works. The exchange rate, he said, is the first line of defense against shocks, within a wider set of economic tools and policies.

He added that a fixed exchange-rate regime does not suit the nature of the Egyptian economy, because it requires specific conditions, including a large share of trade concentrated with one main trading partner, large foreign-currency reserves, and inflation rates close to those of the country whose currency is the peg.

He pointed out that pegging a currency to another limits the independence of monetary policy, as interest-rate moves become largely tied to the monetary policy of the country issuing the anchor currency.

The governor compared the fallout from holding to a fixed exchange rate during the shock linked to the Russia-Ukraine war with how shocks are handled under the flexible regime, noting that the earlier experience saw a parallel currency market emerge within a short period.

Abdalla stressed that the priority is unifying the exchange rate, not focusing on its level as such, adding that a parallel market and high inflation are among the most dangerous imbalances facing the economy.

He said Egypt faced both challenges at once, after inflation reached about 38% and the cumulative rise in prices over three years exceeded 100%. Inflation has now fallen to around 13%, according to his remarks at the session.