© Reuters.
Investing.com – A recent report by Fitch Solutions stated that the Central Bank will reduce the exchange rate of the pound by about 18.6% by the end of the current year 2023 to bridge the gap between the official and parallel rates, provided that the government is able to attract foreign exchange flows.
However, the agency ruled out that Egypt would commit to a fully flexible exchange rate without sufficient flows.
Read also:
The agency indicated that pressure on the pound may ease if the government succeeds in selling assets to external investors, thus stimulating foreign capital flows to Egypt.
In its report on “Egypt Risks” for the last quarter of 2023, the company suggested that the price of the dollar would rise to 38 pounds by the end of this year, compared to an average of 30.96 pounds in banks, approaching its current level in the black market for the dollar, which hovers around the levels of 40 pounds per dollar during the period. last few days.
Read also:
Fitch added in its report that the devaluation of the pound may occur this month or next when the government collects sufficient dollar liquidity to signal to the market that this will be the last devaluation of the currency, but it did not rule out the possibility of postponing the devaluation until after the presidential elections in 2024.
Fitch believes that the Egyptian currency will rise again during the next year after these developments to a level lower than what it will reach in the expected devaluation. The report said: “We still see the possibility of the pound rising slightly to 36 pounds per dollar in the second half of 2024.”
She pointed out that the pound is currently undervalued by 12%, and this percentage will increase after the expected devaluation of the pound.
Read also:
Challenges regarding the sale of state assets
Fitch expects that the government will rely on the sale of assets to finance pending import orders amounting to $5.5 billion. However, she indicated that the sale of state assets faces challenges, as the government collected $1.6 billion at the end of July, while it must collect another $4.6 billion by the end of 2024.
She stated that achieving the goal requires improving transparency and perhaps a new devaluation of the currency to attract investors, and also to control imbalances in Egypt’s external balance.
The report continued: “A successful devaluation would allow for more privatization deals and encourage the return of portfolio investors to the Egyptian debt market, especially with returns reaching record high levels.”
A look at the banking sector
Fitch added that the net foreign liabilities on the banking sector in Egypt may expand during the coming period, in light of the large pending import orders, in addition to foreigners’ possession of treasury bills and bonds, which is still high.
She pointed out that the situation of net foreign assets has deteriorated since last January in light of the exit of hot money and the wave of global monetary tightening.
The agency added that the deficit may expand if outflows continue, and reliance remains on banks to provide liquidity to finance imports, as was the situation in December 2022, or if the authority intervenes to maintain the value of the currency.
But it stated that net foreign liabilities mean that banks are “net borrowers” from external parties, which reflects that public banks are redirecting their foreign assets inward instead of investing them abroad, in addition to increasing reliance on external financing to supply the market with foreign currency and finance the current account deficit.
She said that there is a strong connection between net foreign assets and foreign investors’ holdings of local debt, which leads to an increase in foreign liquidity, and thus banks increase their foreign assets.
Fitch indicated that, in light of the negative real return in Egypt, more hot money may flow abroad in light of the weak investor appetite for emerging market debt.
Investing Saudi Arabia offers you a free webinar in which analyst Omar Al-Sayyah explains to you everything you need to do to prepare for trading correctly and safely.
The webinar takes place on Thursday at 7:00 Riyadh time.
All you have to do is subscribe: click here
2023-09-14 10:54:00
#Fitch #floatation #Egyptian #pound #place #month. #black #market #dollar #reached #Investing.com
