International Trade Considerations for Egypt

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International Trade Considerations for Egypt
Name of Currency and Exchange Rate

The first two global diaries were done in Egypt. The official currency of Egypt is the
Egyptian Pound. Egypt operates under a fixed exchange rate framework in which the central
bank fixes an exchange rate. The Central Bank of Egypt regularly intervenes in the foreign
exchange market to keep Egyptian Pounds constant and stipulated value under a fixed-exchange-
rate regime (Bounader, 2022).
Consequently, it implies that the price of EGP is dictated by the central bank’s policies
and interventions instead of solely dependent on the forces of demand and supply in foreign
exchange markets. An official exchange for EGP, set by the central bank in Egypt, is normally
pegged to some other currency like the USD. Thus, this pegging provides a reliable and
manageable currency conversion rate for corporations dealing with global business transactions.

Effects of Exchange Rate on Trade Participants

A fixed exchange rate maintains one currency with another currency and makes foreign
exchange market transactions predictable; however, the exchange rate must be based on market
forces so that exchange rates are not misaligned with the real market forces (Islam & Hossain,
2021). Trade deals involving Egypt’s economy, particularly the US, depend on the country’s
exchange rate systems. The success of a fixed exchange rate for my profits depends on its
alignment with market conditions compared to trade partners’ exchange policies. The second
video explained how the exchange rates affect the external trade of a nation (The Economics of
Foreign Exchange video 4:33). Egypt, for instance, uses the exchange rate to know if their
market products are competent or less costly compared to what is imported from abroad. The

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changes in EGP may boost or undermine Egypt’s agreements to trade with other countries, such
as the U.S. Should the EGP fall relative to the American dollar, its export commodities will
seemingly rise in affordability due to potentially better export arrangements and higher profits.
Nevertheless, if the EGP goes up against the currency used by foreign buyers, this situation
makes an Egyptian good costlier, resulting in bad exchange contracts and losses.
Financial risks associated with business in Egypt

However, the international monetary system, together with the Egyptian government,
has come up with various risks of conducting business in Egypt, among them being that for a
business, it is important to know about these threats so that it can take precautions against likely
negative consequences.
Exchange Rate Risk: Changes to the exchange rate of a country’s currency may lead to
the losses of significant amounts of money on the part of a country engaging in international
trade (Khodeir & Nabawy, 2019). The currency may suddenly be devalued or appreciated,
increasing costs for importers or competitiveness for exporters. Businesses must constantly
survey and control their vulnerability to changes in exchange rates so as not to run losses.
Political and Economic Instability: The case of Egypt has become an illustrative
example. Situations like political upheaval, change in government policy, or social unrest might
interfere with Business activities and destroy market confidence. Businesses must evaluate and
control the risks, including supply chain disturbance and security.
Legal and Regulatory Risks: Egyptian businesses have many associated risks, including
bureaucracy barriers, corruption, and the dynamism of business regulation (Khodeir & Nabawy,

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2019). To avoid legal, environmental, and reputational issues, an organization must abide by
local laws and be transparent in its commercial activities.
Financial System Vulnerabilities: Like any other financial system in Egypt, it is
vulnerable. These comprise weak banking rules, funding failures, and likely losses from bad
debts (Khodeir & Nabawy, 2019). Therefore, businesses have to carry out due diligence of
counterparties and adopt strong risk mitigation strategies.
International Business Strategy

In selecting an international business strategy for operations in Egypt, the market’s
peculiarity ought to be considered and matched up against the objectives and capabilities of the
organization. The US can export its products/services and produce them domesti