Deutsche Bank predicts decline in Egyptian pound value by 2023

Title: Deutsche Bank Expects Further Decline in Egyptian Pound, Dollar to Rise to 37 Pounds

Date: June 20, 2023

Author: Manal Al-Masry

In a recent report on Egypt, Deutsche Bank’s research department, one of the international German banks, has predicted a new decline in the value of the Egyptian pound by the end of 2023. According to their analysis, the bank expects the dollar to rise from its current rate of about 31 pounds to 37 pounds.

Deutsche Bank maintains its earlier forecast for the exchange rate of the pound against the dollar in the middle of this year, which was around 31 Egyptian pounds to the dollar. However, they are now reviewing their expectations for the end of the year, taking into account the possibility of further weakness in the currency during the second half of 2023.

This projection comes despite recent statements by President Abdel-Fattah El-Sisi, which observers interpreted as indicating the exclusion of any further adjustments to the exchange rate or additional flotation of the pound in the near future. During the National Youth Conference in Alexandria, President El-Sisi emphasized that while flexibility in the exchange rate is possible, national security concerns and the potential negative impact on the Egyptian people would prevent any wasteful actions.

The International Monetary Fund (IMF) has been delayed in conducting the first review of its cooperation program with Egypt in economic reform, which includes financing worth billion. This review was originally scheduled to take place in March. The delay raises concerns about Egypt’s progress in implementing key reforms, such as transitioning to a sustainable flexible exchange rate and executing a program to sell certain assets to attract foreign exchange inflows. The government had aimed to attract $2 billion from these asset sales before the end of June.

Despite Deutsche Bank’s expectations of a further adjustment to the Egyptian pound’s exchange rate, the bank believes that another devaluation of the local currency is not the appropriate solution. Instead, they suggest focusing on addressing the root of the problem, which is Egypt’s domestic debt stock.

As the year progresses, the Egyptian economy will continue to face challenges related to its currency and economic reforms. The anticipated decline in the pound’s value and the potential rise of the dollar to 37 pounds will have implications for various sectors and individuals in Egypt. It remains to be seen how the government and financial institutions will navigate these developments and work towards a more stable economic environment.

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Economic challenges for Egypt.

The report suggests that the decline in the value of the Egyptian pound is primarily driven by factors such as inflationary pressures, fiscal deficit, and reduced foreign inflows. Deutsche Bank’s analysis indicates that these challenges could outweigh the positive impact of prospective foreign investments, bilateral and multilateral funding, portfolio investments, and foreign direct investment.

It is important to note that this analysis from Deutsche Bank provides a different perspective from the previously mentioned forecast from Capital.com. While Capital.com predicted an increase in foreign inflows and a positive outlook for the Egyptian pound in 2023, Deutsche Bank’s report highlights potential risks and a pessimistic view for the currency.

Investors and individuals interested in the Egyptian economy should consider these contrasting viewpoints and conduct further research to form an informed opinion. It is advisable to consult multiple sources, including financial experts and local market analysts, to gain a comprehensive understanding of the current and future prospects for the Egyptian pound as an investment.