What it means
Every currency has a three-letter code set by an international standard, which avoids confusion between currencies that share a name or symbol. The Egyptian pound is written as EGP, and its smaller unit is the piastre, with 100 piastres making one pound.
Using the code in documents makes clear exactly which currency a number refers to. Businesses deal with EGP in several ways.
Exporters invoice Egyptian customers in either pounds or a foreign currency such as US dollars, and importers pay suppliers in whichever currency the contract states. Multinational groups with an Egyptian subsidiary must also translate its accounts from pounds into the group's reporting currency.
Because exchange rates move, the same contract can be worth different amounts at different times. A company that agrees a price in EGP but reports in dollars faces foreign exchange risk (the risk that currency movements change the value of money owed or received).
Finance teams manage it through forward contracts, price adjustment clauses or by invoicing in a stronger currency. The pound has at times been subject to official controls, devaluations and gaps between official and market rates.
Anyone planning cash flows should check how easily pounds can be converted and moved out of the country. Rates and rules change, so always confirm the latest position with your bank.
In a few accounting contexts, a similar abbreviation is used for other ideas, such as estimated gross profit on a long-term project. When reading a document, the surrounding words normally make clear whether EGP refers to money or to a profit estimate.
Practical issues arise in day-to-day treasury work as well. Banks may quote different buy and sell rates, and the spread between them is an extra cost on every conversion.
Companies should also confirm payment timing, since delays in converting pounds can add risk if rates are moving.
In practice
Real-world examples.
Example
A furniture exporter in another country agrees to sell goods to an Egyptian retailer and invoices in dollars. The retailer must buy dollars with pounds to pay, so its cost rises if the pound weakens. The exporter avoids currency risk, but its customer carries it, which can make the sale harder to win.
Example
A consumer goods group owns a factory in Egypt and records the factory's costs in EGP. At the end of each quarter, the group translates those results into dollars for its consolidated accounts. The translation produces a gain or loss that appears in the group's reporting when the exchange rate has moved.
Example
A freelance designer based abroad is paid by an Egyptian client in pounds. She chooses to convert the money promptly, because she does not need to hold pounds and wants to limit currency risk. Her bank charges a small fee, which she builds into her prices. She keeps a record of each rate used so that her tax return is accurate.
Formula
Calculation
Amount in EGP = amount in dollars x exchange rate (EGP per $1).
Worked example, using an assumed rate for illustration only: a company invoices an Egyptian customer $20,000 when the rate is 50 EGP per $1.
1. Amount in EGP = $20,000 x 50 = 1,000,000 EGP
2. Suppose the pound weakens to 60 EGP per $1 before the customer pays in pounds, and the invoice is still fixed at 1,000,000 EGP.
3. Dollar value received = 1,000,000 / 60 = $16,666.67
The exporter loses $20,000 - $16,666.67 = $3,333.33, or about 16.7%, purely because of the exchange rate movement.Case study
Seen in the real world.
Nile Crest Foods is an illustrative, fictional company that sells packaged snacks to supermarkets in Egypt and reports in dollars. Its contracts were priced in pounds and renewed once a year.
When the pound lost value against the dollar during the year, the company's dollar revenue fell even though unit sales were unchanged. Monthly sales of 4,000,000 EGP bought fewer dollars with each passing month.
The finance director responded by adding a clause allowing prices to be reviewed when the rate moved by more than 5%, and by converting cash into dollars more often. The illustrative lesson is that pricing in a local currency requires a plan for exchange rate movements. The company also began reporting a currency-neutral growth figure so that the board could see underlying performance separate from exchange effects.
Watch out
Common mistakes.
- Quoting an amount without stating the currency code, which can lead to confusion between pounds, dollars and other currencies.
- Using an old exchange rate to value a contract, when rates can change quickly.
- Ignoring foreign exchange risk on contracts priced in EGP while reporting results in another currency.
Questions
People also ask.
What does EGP stand for?
It stands for the Egyptian pound, the national currency of Egypt, which is divided into 100 piastres.
How do I convert EGP to dollars?
Divide the amount in EGP by the number of EGP per $1, using a current rate from your bank.
Can I hedge EGP risk?
Often yes, through forward contracts or other products from banks, although availability and cost vary, so ask your bank what is offered.
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