obstacles
Ratings agency Fitch said this month that Egypt’s growing current account deficit and $33.9 billion in international debt payments leave Egypt vulnerable in the three years to mid-2025, when it warned a downgrade on the country’s credit rating.
Only default-stricken Sri Lanka and soon-to-default Ghana spend more than the 41% of government revenue Egypt is estimated to spend next year on interest payments on its debt.
Bankers say that with very limited amounts of dollars and other foreign currency available in Egypt, importers are facing problems financing goods from abroad, causing bottlenecks for factories and retailers.
Farouk Sousa, an economist at Goldman Sachs, said a backlog of corporate demand for foreign currency and tight liquidity in the system would continue to weaken the pound if it was allowed to trade freely.
Sousa said, “Fundamental valuation models suggest the pound is currently undervalued by 10%,” while James Swanston of Capital Economics said the pound would probably appreciate by at least $25, taking into account the inflation gap. Had to be weak. Egypt’s main trading partner.
Egypt’s IMF talks dragged on for seven months and resulted in the second major devaluation of the year. The central bank continues to allow the pound to weaken incrementally by £0.01 or £0.02 each trading day.
Analysts say many Egyptians on the street see the currency’s strength as a barometer of how well the economy is managed, and as a result the government has long been reluctant to allow it to weaken rapidly. .