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Investing.com – The pound continued its slight declines over the past few weeks, as it moves in a narrow range near the 30-pound level for one dollar, after witnessing sharp declines that exceeded the 32-level level during the past month.
Egypt is considering raising as much as $1.5 billion as early as next week through its first sale of Islamic bonds known as sukuk, according to people familiar with the plans. Sources told Bloomberg that the government could start sales roadshows this week, and explained that the potential sale would depend on market conditions.
The Gulf states had pledged more than $10 billion in investments to Egypt, but only a small part of this financing, which the International Monetary Fund described as urgently needed by the country, was pumped.
On the other hand, Egypt’s external debt decreased by 0.5% on a quarterly basis to reach less than $155 billion in the first quarter of the fiscal year 2022-23, during the period from July to September 2022, down from $155.7 billion in the last quarter. from the last fiscal year.
The following is a look at the most important thing that dominates the Egyptian economic scene during this period, and what will affect the pound in the coming period.
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Pound and futures
In national banks, exchange rates stabilized at levels of 30.52 pounds per dollar for sale, and levels of 30.42 pounds per dollar for purchase, in the National Bank of Egypt and Banque Misr during Thursday’s trading.
In private banks, the exchange rate against the pound stabilized at 30.62 pounds per dollar for sale, while the purchase price recorded 30.57 pounds per dollar.
According to data from the Central Bank of Egypt today, Thursday, the dollar exchange rate stabilized at levels of 30.6234 pounds per dollar for sale, while it recorded levels of 30.5222 pounds per dollar for purchase.
While the futures contracts for 12 months for the pound indicated a new decline of 1.2% today, to the level of 36.025, according to Bloomberg East News. This decline indicates that derivatives traders see the possibility of a larger fall for the Egyptian pound.
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Gulf support.. Will it continue?
Economists said that Egypt may be in need of “additional external support” to service the debt and support the Egyptian pound, with the increasing current account deficit, amid ambiguity about the steps that the Gulf countries will take, which are still the most supportive of Egypt, as they provided aid in the past to Cairo in the form of deposits, grants and supplies. energy as well as pumping huge investments.
But the shape of Gulf aid to Egypt may not be the same, according to Kristin Smith Diwan, a senior fellow at the Arab Gulf States Institute in Washington.
“Gulf countries like Saudi Arabia have recently extended aid conditions to support Egypt in boosting external financing, but they also say that future aid will bring more conditions,” she said.
And the Saudi Finance Minister, Muhammad Al-Jadaan, spoke during the Davos Economic Conference in Switzerland on January 18, about a change in the approach that Riyadh has been using for decades in providing aid and grants to many countries in the Middle East, especially Egypt and Lebanon, while most of the aid was in the form of direct grants. Unconditional bank deposits.
Islamic bonds
Egypt is considering raising as much as $1.5 billion as early as next week through its first sale of Islamic bonds known as sukuk, according to people familiar with the plans. Sources told Bloomberg that the government could start sales roadshows this week, and explained that the potential sale would depend on market conditions.
The Egyptian government chose Citigroup, Credit Agricole SA, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, and Abu Dhabi Islamic Bank PJSC, for the potential sale, according to Bloomberg.
As part of an economic reform aimed at getting help from the International Monetary Fund and regional allies, the authorities revived a plan to sell stakes in state-controlled companies earlier this month. Egypt’s recent $3 billion agreement with the International Monetary Fund includes a commitment to reduce the influence of state-run companies, according to Bloomberg.
Debt and reserve
Egypt’s external debt decreased by 0.5 percent on a quarterly basis, to less than $155 billion in the first quarter of the fiscal year 2022-23, during the period from July to September 2022, down from $155.7 billion in the last quarter of the last fiscal year. .
According to Central Bank of Egypt data, this decline is the second in a row since the external debt reached its highest level at $157.8 billion during the third quarter of the fiscal year 2021-2022.
The long-term external debt recorded $127.57 billion, down from the level of $129.089 billion in the comparison period, while the short-term external debt rose to $27.408 billion from $26.619 billion in the comparison period. billion dollars) for about 236,787 transactions by the end of January 2023. The real-time settlement system is used to settle high-value, high-value payment orders that take place within the country.
On the other hand, in terms of cash reserves, official data indicate that Egypt’s foreign exchange reserves have risen to the highest level since May of last year.
According to data from the Central Bank of Egypt, the reserves rose to the level of $34.224 billion by the end of January 2023, an increase of about $222 million. And the Central Bank announced last month that the cash reserves rose at the end of last year to the level of 34.002 billion dollars, compared to about 33.53 billion at the end of November (November).
inflation
The Central Bank of Egypt revealed that the annual general inflation rate rose to 25.8% in January 2023, compared to 21.3% in December 2022. He attributed this rise to the continuation of supply chain disruptions and fluctuations in the exchange rate of the Egyptian pound since March 2022, in addition to other inflationary pressures on the demand side. .
The bank pointed out that the annual rate of general inflation in January 2023 was mainly affected by the increase in the prices of food commodities and supported by the increase in the prices of non-food commodities. .
The recent decline of the pound put pressure on the Egyptian society, which prompted them to reduce their expenditures to be limited to the basics only. Where the Egyptian government says that inflation is a top priority for it during the next stage.
The future of the pound.. Expectations vary
Hany Genena, an Egyptian economist and lecturer at the American University, expected that the dollar would drop below 30 pounds within a month, stressing that the black market would disappear and exchange rates would be controlled.
Mohamed Badra, an Egyptian banking expert, confirmed that the dollar will settle at 26 or 27 pounds, but during the last quarter of this year, justifying his opinion by saying that the demand for foreign currency will equal the supply, and therefore the pace of high rates will subside, in addition to the improvement in the performance of the local currency. .
Mohamed Maher, CEO of Prime Securities Trading Company, said that there is a shortage in dollar liquidity at present, and therefore it is expected that a state of increases will occur during the coming period. He added that the dollar might rise by 5 to 10 percent, to reach from 31.5 pounds to 33 pounds during the first half of this year.
And 18 economists polled by Reuters predicted that the Egyptian pound would rise to 26.24 per dollar by the end of June 2023, but would decline again to 28.50 by June of the following year 2024.
For her part, Nematallah Shukry, head of the research sector at HC Securities and Bonds, expected that the exchange rate of the pound against the dollar would reach 32 pounds by the end of 2023.
She added that the pound’s performance during the current year will depend on foreign investments, whether in local debt instruments or foreign direct investment, in addition to the usual sources of foreign exchange such as tourism and remittances from Egyptians working abroad.