01:08 PM
Friday, March 24, 2023
I wrote – Manal Al-Masry:
Expectations are increasing that the price of the dollar will rise against the pound during the current year. HSBC Bank expected that the average price of the dollar during the year would reach 37.5 pounds, and that the price of the dollar would range between 35 and 40 pounds, in a report issued this week.
A report issued by the group, under the title “3 Major Barriers That Must Be Removed,” which Masrawy reviewed, indicated that the Egyptian economy faces 3 major challenges that increase the pressures on the exchange rate of the pound against the dollar during the current year 2023.
He said that the first challenge revolves around the importance of having a flexible exchange rate for the pound against other foreign currencies, which is an essential part of the agreement that Egypt signed with the International Monetary Fund late last year.
Egypt signed an agreement with the IMF to obtain a $3 billion loan last December, and is awaiting the first review of its economic program with the Fund, in order to obtain the second tranche of the loan.
The HSBC report indicated that the presence of weak inflows and accumulated demand for dollars may lead to the pound exceeding – temporarily – the range of expectations, although following a flexible exchange rate means that there can be no shortage of foreign currencies.
Egypt has been seeking to follow a free exchange rate, since its negotiations with the IMF began, and the pound fell by about 96%, so that the dollar jumped from 15.76 pounds to 30.93 pounds.
The report indicated that the monetary policy followed by the Central Bank in its last meeting and decided to fix interest rates indicates expectations of a significant tightening and raising interest rates by 3% in the next meeting on Thursday, March 30, to confront high inflation to record levels.
The annual core inflation rate rose to 40.3% in February, compared to 31.2% in January, according to a statement issued by the Central Bank earlier.
The annual inflation rate in Egyptian cities jumped last February to 31.9%, compared to 25.8% last January, according to a statement from the Central Agency for Public Mobilization and Statistics earlier.
Asset sales deals with Gulf partners remain a challenge for Egypt, as the asset sale program and the commitment to sell stakes in 32 state-owned companies and financial institutions are “complicated to implement” although it is a major component of the International Monetary Fund’s program.
According to the report, the proceeds from the asset sales, which attracted strong interest from the GCC and beyond, should help ease balance of payments pressures and are expected to gain momentum once the operation begins.
In a previously issued report, the International Monetary Fund expected that its approval of financing Egypt would contribute to attracting additional financing of about $14 billion from regional and international partners, including the Gulf states, through purchases of state-owned assets.