The bank attributed the expectations to the fact that another sharp devaluation of the pound before the end of Egypt’s fiscal year, which ends on June 30, could hamper the government’s target of a budget deficit of 6.5. % and the stability of the country’s debt. relative to GDP, according to statements by Citi’s strategic analyst. Group”, for Central and Eastern Europe, the Middle East and Africa, Luis Costa.
Costa said: “The Central Bank of Egypt will likely wait for the good tourism revenue of around $14 billion and its impact on the economy, before deciding on the need for further flotation of the pound.”
Costa confirmed that Citigroup’s strategy is to sell the dollar against the Egyptian currency in the non-deliverable futures market for a period of one month, “against the decline in the possibility of devaluation of the pound before the end of the financial year. in progress”.
Markets are also anticipating the entry of large financial flows from abroad, as the government implements the bid program it announced to sell some of its profitable assets on the Egyptian Stock Exchange, and some strategic investors , with no less than two billion dollars to sell some state assets.
And Egypt’s Finance Minister Mohamed Maait had earlier confirmed that the Egyptian state’s capabilities regarding the availability of hard currency are very sufficient and have the capacity to fulfill all its financial commitments, and pointed out that the ministry is is committed to achieving fiscal discipline and reducing the budget deficit.
Cup betting
An analysis by the Bloomberg agency had shown that previous bets on the devaluation of the Egyptian pound had diminished, especially since the derivatives used to hedge risks or for speculation, which referred to the approach of devaluation of the currency for the fourth time in Egypt since March 2022, showed traders cutting back on those bets over the past two weeks.
Additionally, the one-month non-deliverable British Pound futures contract was trading around 32.9 on Thursday, after recovering from an all-time closing low of 35.3 on April 25.
Serious implementation of a flexible exchange rate
In statements earlier this month from the director of the International Monetary Fund’s Middle East and Central Asia department, Jihad Azour, he confirmed that Egypt is “serious about implementing a flexible exchange rate system , as the state works to restore investor confidence in an economy that has been battered by the fallout from the Russian invasion of Ukraine .”
The Fund’s board had approved a $3 billion loan for Egypt under a 46-month program, as the country suffers financial pressures due to a lack of dollar liquidity with the outflow of speculative money following the war in Ukraine.
And a Fund report said last January that Egypt would be subject to Monetary Fund reviews under the program, and the first review was due to be completed in March 2023, but its new date has yet to be announced. . , provided that the second review is completed in September this year.
Egypt has only secured the first tranche of the loan, which amounted to around $347 million, and is awaiting the second tranche.
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