The black market exchange rate for the US dollar in Egypt is experiencing a decline due to improvements in dollar liquidity within Egyptian banks. This allows for easier access to foreign currency without complications. The black market rate for the dollar has dropped to around 40 to 41 Egyptian pounds, a decrease from about 50 pounds at certain times. HC Securities & Investment, a reputable financial institution, has made predictions for the future of Egypt's economy in 2024, including the expected exchange rate for the Egyptian pound and inflation rates.
Economic Predictions for Egypt
Heba Mounir, a macroeconomic analyst at HC Securities & Investment has noted that the shortages in dollar liquidity and strict monetary policies have hindered GDP growth. The real GDP growth in Egypt decelerated to 3.8% during the fiscal year 2022/2023. However, Mounir anticipates that the growth rates will increase to 4% in the current fiscal year 2023/2024, nudging close to the government's target of 4.1%, while the International Monetary Fund (IMF) projects only 3.7%.
Devaluation of the Egyptian Pound
The devaluation of the Egyptian pound can be attributed to the outflow of foreign capital following the Russian-Ukrainian conflict. This had a significant impact on inflationary pressures and borrowing for companies and personal consumption. Mounir predicts that the GDP growth for the fiscal year 2022/2023 will be spurred by increases in personal consumption and foreign direct investment, with a contraction in the trade deficit. However, inflationary pressures are expected to persist, with inflation possibly accelerating to an average of 33.2% annually.
The Monetary Policy Committee and Interest Rates
The Monetary Policy Committee is projected to maintain interest rates at their next meeting on December 21, after having previously raised them by 1100 basis points since the fiscal year 2021/2022 to counter inflation. Egypt's external debt reached $165 billion by the end of June 2023, with $33.9 billion repaid and about $24.0 billion rolled over during the fiscal year 2022/2023. The banking sector's foreign currency liabilities, including the central bank's, are expected to decrease by about 6% to $25.5 billion by June 2024, due to improved foreign currency inflows.
The analyst emphasizes that Egypt's implementation of IMF reforms and creating a level playing field with the private sector are crucial for attracting foreign direct investment and increasing foreign currency liquidity. Egypt's budget deficit is expected to widen to 7.1% of GDP in the fiscal year 2023/2024, mainly due to increased interest costs. In general, the black market exchange rate for the dollar and foreign currencies tends to fall when positive news about the Egyptian economy is released or when positive forecasts for the Egyptian pound are made by international institutions and banks.