Cairo – December 17, 2023: International Bank HSBC shared that it predicts Egypt will devaluate the Egyptian pound during the first quarter of the new year, expecting it to settle at LE 40-45 against the US dollar, according to a Friday note.
The new numbers are higher than the bank’s previous forecast of LE 35-40 against the USD, also for the same period.
The bank stressed that the pound’s adjustment is simply part of a wider transition by the government toward a more flexible exchange rate regime.
“This adjustment is also expected to facilitate the completion of the long-awaited first review of the International Monetary Fund's reform program,” HSBC added.
The HSBC’s latest data is in line with recent reports from EFG Hermes and Fitch Solutions' research unit BMI.
Last month, BMI projected a new devaluation of the Egyptian pound to position the LE at 40-45 against the USD in February and believes that the Central Bank of Egypt (CBE) will not apply another increase in key interest rates until the new year. The CBE’s next meeting is scheduled for December 21.
EFG Hermes believes that the pound will fall to LE 40 against the USD as “an eventual area of stability for the [pound] when the FX market clears”.
in early November, Mohamed Abu Basha, lead MENA economist at EFG Hermes, shared in a note to clients that he saw evidence that foreign currency was accumulating in the economy and that the pound’s adjustments could be coming to an end.
To mitigate the challenges caused by the FX shortage, the Egyptian government unveiled a plan to attract $191 billion annually within three years.
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