The day the pound lost 30% of its strength during the monarchy!
We often read information about the value of the Egyptian pound in previous eras, some of it accurate and some not. For example, someone might post a picture of a five-millime coin with a serrated edge, calling it a "red millime," and claiming that this millime was worth eight US dollars at once! Most of the comments are filled with curses on the treacherous times, the bad situation, and the lack of blessings!
Sometimes we find a publication asserting that the Egyptian pound during the monarchy was worth five dollars (a fact that is correct but incomplete), as it doesn't clarify which monarchy it refers to. Does it mean Farouk, Fuad, or perhaps it was confused and meant Hussein, Abbas, Tawfiq, or Ismail? The other natural question that follows is: When, then, was the pound devalued? Did it happen at midnight on July 23, 1952, for example? Or upon the declaration of the republic on June 18, 1953, or at another time? The truth is that the Egyptian pound has been devalued (or, to use a more polite term, "adjusted") several times throughout its history, most notably on September 19, 1949, when it was devalued by 30% in one go, and that had a story behind it:
The Egyptian pound was still pegged to the British pound at that time, but the pound itself was under tremendous pressure. Firstly, the British Empire, despite its victory in World War II, was effectively bankrupt due to the human, moral, and material costs of the war. Had it not been for American loans, it would not have been able to withstand Hitler and his armies. However, these astronomical loans and their interest "divided Britain"—it suffices to know that it was unable to repay them in full until December 31, 2006! This was in addition to the empire's debts to its colonies for equipment, support, food, etc., debts that had also accumulated during the war.
Second: Currencies, like any commodity in the world, have supply and demand. Simply put, if the world sought to acquire American products such as cars, radios, and refrigerators and refrained from buying English products, various governments would begin searching for dollars to buy goods for their people and sell British pounds. Of course, the Bank of England would try to buy British pounds from the markets by selling what it owns of precious metals such as gold and silver, but this situation would not last forever.
Third: The empire itself is no longer what it was, as it lost India, Pakistan, Sri Lanka, Palestine and Northern Ireland in the previous year. Any kingdom that loses its lands and possessions – just like people – is considered to have lost part of its capital, and consequently its economic power decreases and this is reflected in its currency.
Due to all these pressures, the British government was forced to devalue the pound sterling by 30% in one go, and several countries followed suit, including Egypt, Palestine, Australia, India, Ireland, and New Zealand. The Egyptian government issued the following official statement in September 1949: ”The Ministry of Finance announces that it has been decided to amend the value of the Egyptian pound in relation to the dollar and to gold. Its new price in relation to the dollar is $2.871 instead of $4.133, and its gold weight is 2.55187 grams of pure gold instead of 3.67288 grams. The new price will be effective from the first hour of Monday, September 19, 1949. The Council of Ministers has decided to suspend work in banks on Monday, September 19, 1949, and to suspend work in the stock exchanges on Monday and Tuesday, September 19 and 20, 1949.”
Sources: Al-Ahram issue dated September 18, 1949 and various other sources on the economic history of the British Empire.
Moheb Rizkalla
