Expectations of the price of the Egyptian pound against the dollar in the coming period, in light of the exacerbation of the foreign currency shortage crisis in Egypt, and the widening gap between the official price of the pound against the dollar and its price on the black market, the expectations of international economic institutions tend to depreciate soon in the value of the Egyptian pound against foreign currencies during the current year 2023 .
Expectations of a record decline for the Egyptian pound at this date
A research note was issued by the US agency “S&P Global” expecting to reduce the price of the pound against the US dollar during the next few period, to end the current year 2023, at the exchange rate at the level of 37 pounds against the dollar in the official market.
This expectation comes, after the rise in the price of the dollar against the pound on the black market during the few days preceding the level of 40 pounds, coinciding with the approaching date of the International Monetary Fund’s review of its financing program with Egypt, as experts expect that the review will take place during the coming month of September 2023, while the exchange rate witnessed stability in banks. The official rate was 30.95 pounds during the previous month of March.
The research note on the American agency also announced its expectations of an increase in economic inflation rates in Egypt, despite the record recorded during the previous month of July 2023 at the level of 36.5%, given the increase in the electricity tariff, and the supply bottlenecks represented by the depreciation of the pound and the accumulation of imports.
Therefore, this is likely to lead to upward pressure on rice and wheat prices due to Russia’s withdrawal from the Black Sea Grain Initiative, and India’s decision to ban rice exports to keep food inflation at a high level. Overall inflation rates are expected to peak at 39% on the basis of Annually during next October 2023, to end the current year at 35% and 20% during the next year 2024.
The fate of the Egyptian pound during the coming period
The research note expected a new devaluation of the Egyptian pound from the level of 30.90 to the level of 37 pounds against the dollar at the end of this year, and the research note depends on these expectations that the Arab Republic of Egypt will move forward towards the transition to a more flexible exchange system as agreed with the International Monetary Fund, During the month of December, Egypt agreed with the International Monetary Fund to obtain a financing program worth $3 billion in return for implementing several measures, including flexible exchange rates and selling government assets.
It is necessary for the International Monetary Fund to conduct an initial review of its financing program for Egypt during the previous month of March, but Egypt’s delay in implementing many measures led to the disruption of the first review, and the agency expects that Egypt will complete the first review during the month of September next to the month of October, provided that this witness The period is a new adjustment at the exchange rate of the pound.
The research note also stated that the Egyptian authorities could artificially maintain the exchange rate in a state of stability until the end of the current year, and this expectation may occur in the event that asset sales progress and this does not correspond to the authorities’ expectations of maintaining a managed exchange rate system, in which case it will be The currency is stronger than expectations assume, which will reduce the pressure of economic inflation, and allow the Egyptian Central Bank to delay raising interest rates until the end of this year, or even at least keeping rates suspended until the end of this year.
However, there is another scenario that awaits the Egyptian pound, but it is more dangerous, which is a further devaluation of the pound, especially in the event that the Egyptian Central Bank carries out the new flotation of the pound. From pressure due to economic inflation rates and forcing the Central Bank to raise interest rates by 300 basis points, and this is a repetition of the December scenario for the previous year 2022.
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2023-08-30 14:42:45
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