Media reports said that Egypt is still facing a crisis in saving the dollar, while anticipating the first review of its economic program with the IMF.
A report by “Masrawy” website said that the pressure on the pound appears in its decline in futures contracts for a period of 12 months, in which the dollar rose to the level of 43 pounds, according to international press reports today, Thursday.
According to the site, the pressures can also be seen in the trading of international depository certificates of the Commercial International Bank on the London Stock Exchange, at the largest discount compared to its share price on the Egyptian Stock Exchange since August 2016.
Egyptian bonds denominated in dollars also declined, including standard bonds due in 2025, while the Ministry of Finance is facing difficulties in selling treasury bills, as it receives purchase orders submitted by investors at a high interest rate that reached 25.5% on some terms.
Markets are sensitive to a new decline in the pound against the dollar, at a time when the International Monetary Fund affirms that the pound’s depreciation is a key factor in stabilizing the Egyptian economy.
Likewise, the black market values the dollar much higher than the banks, as traders indicate that it ranges between 35-36 pounds, while it is still officially trading at the threshold of 31 pounds.
Despite the government’s announcement of its plan to offer stakes in 32 companies and banks within the offering program, which the fund considered a primary source of support for its dollar inflows, Egypt has not yet announced major deals within the program.
Data published by the International Monetary Fund in its report issued this week – and analyzed by Hani Genena, an economic analyst and lecturer at the American University – indicates the fund’s expectations for the exchange rate of the pound against the dollar for the coming years.
Genena says, “The fund does not publish explicit forecasts of the exchange rate in a separate item in the database, but it can be calculated using a calculation based on nominal domestic product denominated in pounds and dollars.”
He added that by applying the calculation to the data available in the fund’s report, the expected average exchange rate during the current fiscal year is 25.8 pounds per dollar.
However, this average is expected to increase over the coming fiscal years, to reach 33.5 pounds per dollar in 2023-2024, and then to 35.5 pounds per dollar in 2024-2025.
The fund expects that the average price of the dollar will rise to 37.2 pounds per dollar in the year ending in June 2026, then in the fiscal year 2026-2027 it will rise to 38.5 pounds per dollar, then to 39.6 pounds per dollar in 2027-2028.
According to Jenina, with the exception of the next fiscal year, “the fund expects the annual decline in the exchange rate against the dollar to stabilize at a rate of 3 to 6 percent annually, which is approximately the inflation difference between Egypt and America.”
The annual inflation rate in Egypt rose during the month of March, reaching 33.9%, while the annual inflation rate in cities recorded 32.7%, while the annual inflation rate in America during March reached 5%.
He pointed out that these expectations depend on the Central Bank achieving the inflation target at the end of 2024, “which will be evident from the continued decline in the growth of the money supply during the coming months.”
The Central Bank set new targets for the inflation rate after exceeding the targets announced at the end of last year, which were set at 7% (±2%) during the last quarter of 2022, which is the same target rate during the fourth quarter of 2024.
This article was originally published by RT.
