JP Morgan expects further devaluation of Egyptian pound

AFRICAN BUSINESS AND ECONOMYFebruary 16, 2024 at 4:10 PM UTC

TLDR

JP Morgan predicts a forthcoming devaluation of the Egyptian pound, estimating a range of EGP 45 to EGP 50 against the US dollar.
The devaluation may be accompanied by a 2% rise in interest rates, potentially reaching 23.5%.
Egypt is working to recover from the economic crisis triggered by the Russian invasion of Ukraine, with the Egyptian pound already devalued by more than half since March 2022.

JP Morgan anticipates a forthcoming devaluation of the Egyptian pound, estimating it to fall within a range of EGP 45 to EGP 50 against the US dollar, according to a report cited by Asharq Business. The US-based giant also foresees this devaluation being accompanied by a 2% rise in interest rates, potentially reaching 23.5%.

The bank further notes that the projected devaluation of the EGP, combined with a substantial increase in annual inflation rates, may serve to mitigate the rapid acceleration of inflation in the foreseeable future.

Egypt is currently trying to steer its economy out of a crisis triggered by the global economic shock caused by the Russian invasion of Ukraine. Since March 2022, the Egyptian pound has been devalued by more than half.

Key Takeaways

Egypt has been facing significant economic challenges since early 2022, leading to increased pressure on its citizens. The issues include soaring prices, an unresolved foreign currency crunch, and delays in implementing crucial reforms. The country's substantial foreign debt, accrued through extensive borrowing abroad, has contributed to a shortage of hard currency needed for essential imports. In December 2022, Egypt signed a $3 billion financial support package with the IMF. However, disbursements from this package were halted as Egypt fell behind on commitments to adopt a flexible exchange rate and reduce the state and military's dominant role in the economy. The Egyptian pound has weakened further, reaching about 50 pounds to the dollar on the black market, compared to the official rate of 31 pounds. This depreciation exacerbates economic challenges for the country. Debt repayments due in 2024 are at an all-time high, standing at least $42.26 billion. This presents a complex and challenging economic environment for Egypt.

JP Morgan

Egypt

Egyptian Pound

Economy

Devaluation

Depreciation