The Egyptian Ministry of Investment issues decree to mitigate negative effects of the floatation of the Egyptian Pound
31 March 2017

The Egyptian Ministry of Investment issues decree to mitigate negative effects of the floatation of the Egyptian Pound. Riccardo Bicciato (Cairo-based local partner) provides an update on this measure.


Following the free float of the Egyptian Pound on 3 November 2016 and consequent changing currency values of the assets and liabilities, businesses have reported extraordinary profits or losses.

Sectors affected by the floatation include the construction sector, where EMAAR Egypt reported FX EGP 83.6m losses and Arabian Cement EGP 81.1m, the telecommunications sector, where Orange Egypt reported EGP 2.27b losses, and the food industry, where Edita reported EGP 203.8m losses.

To counter the Egyptian Pound devaluation, the Egyptian Ministry of Investment issued a decree* that adds a temporary addendum to Egyptian Accounting Standard No.13 under which the FX differences in income statements are recognised (para. 28).

Businesses may continue to record in their income statements the differences in currency values resulting from the flotation, but under the decree, they may also consider the following alternatives:

  1. liabilities in foreign currency connected to fixed assets, immovable property investments, intangible assets (excluding goodwill), exploration and revaluation assets acquired before the floatation may be included in the acquisition cost of the related assets;
  2. differences in the debit and credit financial accounts (recorded in foreign currencies on the floatation date) resulting from the floatation may be recognised in the income statements; or
  • amend the value of one or more categories of their fixed assets, intangible assets, exploration and revaluation assets recorded in the financial statements at their historical values. To amend the values, a factor (adjusted to take account of the inflation difference of that period) must be used that reflects the change in the exchange rate on the floatation date.

The decree came into effect on 16 February 2017 and, as mentioned, is temporary. In fact, according to the definitions section, the addendum applies only to financial statements for the financial year (or part of it) starting on or before the floatation date (i.e., 3 November 2016).

It is now up to businesses to carefully evaluate, from an accounting perspective, whether it is more advantageous for them to apply the standard rules or opt for one of the alternatives offered by the decree. All the technical accounting aspects related to applying the alternatives are described in detail in the addendum to the decree.



* Ministry of Investment Decree No. 16 of 2017 adding an addendum (A) entitled “The effects of changes in currencies exchange rates” to Egyptian Accounting Standard No. 13 (published in Egyptian Gazette Issue No. 38 (continued) of 15 February 2017). The Accounting Standards were issued by Ministry of Investment Decree No. 110 of 2015.