Egypt took the unprecedented step of allowing its currency to trade freely as it announced a series of sweeping measures to stabilize an economy battered by a crippling dollar shortage that has raised fears of social unrest, Bloomberg said on its website. 

Stocks jumped the most in eight years and the pound slumped after the central bank’s decisions, which included raising its two benchmark overnight interest rates by 3 percentage points. 

The measures move Egypt closer to securing a $12 billion loan from the International Monetary Fund.

"We’ve been expecting this for a long time, and it is very positive," Rami Sidani, head of frontier investments at Schroders Plc in Dubai, said by phone. 

"We expect a lot of interest in Egypt, it’s a massive economy that has been put on hold for years," he added.

The central bank said its decision to immediately liberalize the exchange rate is part of Egypt’s "home-grown reform program, backed by the support of the international community."

"This move will allow market demand and supply dynamics to work effectively," it said.

The benchmark EGX 30 Index for stocks surged 8.3 percent in early trading in Cairo. 

The currency’s 12-month non-deliverable forwards plunged more than 10 percent to a record 16.6758 per dollar at 9:45 a.m. in Cairo.

"Once you have a floating rate, this gap between the official and black market rates narrows pretty quickly, unless the government interferes, which it shouldn’t," said Tariq Qaqish, the Dubai-based head of asset management at Al Mal Capital PSC.

"Before we increase our exposure to Egyptian assets, we want to see that the entire process is seamless, like getting money into and out of the country," he said.