The Egyptian pound is exposed to further decline in the future

Economic analyst at Oxford Economics Africa, Cali Davis, predicted, in an interview with Al-Arabiya, that the financing gap for Egypt will be much more than the estimates of the International Monetary Fund and will reach $20 billion for the year 2023 alone.

As Davis predicted, the decline continued Egyptian Pound The dollar reached 32 pounds by the end of the year.

“We expect that the financing gap for Egypt will be around $20 billion for the year 2023 alone, and this includes higher expectations of the current account deficit, a decline in foreign direct investment flowing into Egypt, and lower estimates of investment portfolio flows. We also believe that the external debt service will be higher than the IMF’s estimates. The International Monetary Fund in its latest report, because the fund seems to exclude short-term payments, and it is not clear why, in addition to dues to the Gulf countries…if our estimates are much higher,” according to Cali Davis.

The economic analyst at Oxford Economics Africa said that the Egyptian pound is heading towards a floating exchange rate mechanism, especially since the head of the International Monetary Fund mission to Egypt confirmed that Egypt has not intervened in the exchange markets since October, and I believe that the last wave of the pound’s exchange rate decline in January It came as a result of the release of some goods accumulated in the ports, which led to the withdrawal of foreign currency reserves, which led to the weakness of the Egyptian pound.

She added that the Egyptian currency is subject to further decline in the future, especially if foreign reserves are exposed to more pressure, which will limit the Central Bank’s ability to intervene in the exchange markets.

And she continued, “Our current expectations are that the Egyptian pound will decline, so that the dollar will reach 32 pounds by the end of the year, and this will contribute to raising inflation.”

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“We expect inflation in Egypt to peak at 24% or 25% in March on an annual basis, and to decline to 17% by the end of the year in December,” said Callie Davis.

With regard to the exchange rate, Davis said, “We see that it follows a floating exchange rate mechanism or a mechanism close to that, but any downward pressure on foreign reserves will have negative repercussions on these expectations.”

And Cali Davis explained that since the recent decline in the exchange rate of the Egyptian pound, we have seen many media reports regarding the flow of investments and the increase in demand for Egyptian assets, but I see that as long as the uncertainty regarding the Egyptian currency continues, foreign investors will remain somewhat reluctant to invest in it. Financial assets issued by the Egyptian government, at least until they are assured that these assets will maintain their value, and will not decline once morest the dollar.. This is a constant risk to the markets.

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