Egypt not out of the woods after IMF deal
Egypt’s finances remain in a precarious state despite two major currency devaluations this year and a brand new $3 billion International Monetary Fund rescue package, economists say.
With debt interest payments set to soak up over 40 per cent of the government’s revenues next year and a lack of foreign currency still hurting the economy, investors remain cautious despite a post-imf bounce in sentiment.
Bankers in north Africa’s largest economy point out that the Egyptian pound’s black market rate of 26-26.5 per dollar is still 8 per cent below the 24.53 official rate despite a 36 per cent overall devaluation this year.
Foreign exchange traders, meanwhile, seem convinced it will be 28 to the dollar this time next year and Japanese bank Nomura has just put Egypt top of its list of countries at high risk of a currency crisis..
“The Egyptian pound will likely remain under pressure until more US dollar inflows from GCC (Gulf nations) and committed foreign direct investment materialises,” said Carla Slim at Standard Chartered Bank.
Last month’s IMF deal has provided some respite.
Egypt’s soon-to-pay-out government bonds have rallied some 15 per cent and the premiums demanded by investors to hold them rather than US Treasuries have shrunk by almost a third.
Bonds that won’t have to be paid for another 15-20 years have also gained sharply, although at 65-70 cents in the dollar and a third below their face value, analysts stress they still indicate danger.