Egyptian Pound Exchange Rate Expected To Reach $21 By 2024-Capital Economics
The Egyptian pound is expected to trade at 21 against the dollar by the end of 2024, bringing the public debt-to-GDP ratio to almost 100%, according to Capital Economics.
“While we don’t believe Egypt faces the same debt strains as some other emerging markets, a weaker currency and tighter global financial conditions pose a risk,” Capital Economics said in a Thursday briefing. .
The London-based economic research institution expects the Egyptian pound to suffer a 25% drop by the end of 2024, if all other variables remain unchanged.
On March 21, the Central Bank of Egypt devalued the currency by 15.7 pounds to the dollar, where it had remained virtually flat for nearly 18 months. Since then, the Egyptian pound has lost almost 16% of its value, trading at an average of 18.3/$
This decision was prompted by the weakening of Egypt’s external position amid the ongoing war between Russia and Ukraine.
Capital outflows coupled with falling tourism receipts and an inflated import bill have recently weighed on the country’s foreign exchange reserves.
Egypt’s foreign exchange reserves increased from $40.99 billion in February to $37.082 billion in March. Against this backdrop, Egypt’s dollar sovereign bond spreads widened by more than 50 basis points and yields exceeded 10%, according to Capital Economics.
“In the meantime, investors also appear to have been wary of the impact of the weaker currency on Egypt’s public debt in foreign currency, which is equivalent to around 24% of GDP,” Capital Economics said.
On Monday, Egypt’s Central Bank announced that external debt reached $145.5 billion in the second quarter of the country’s 2021-2022 fiscal year (which starts July 1) from $137.4 billion in the first quarter.
(Writing by Noha El Hennawy; editing by Seban Scaria [email protected])