The report said that the CBE’s actions were “larger-than-expected” and showed a “commitment to reforms”, which were supported by an augmented IMF loan of $8 billion. The report also said that the CBE’s moves paved the way for increased foreign exchange (FX) inflows, but stressed the need to sustain some level of FX flexibility.
Hande Kucuk, an economist at Morgan Stanley, said that the CBE had made a “bold move” in allowing the pound to adjust to above 50 against the US dollar, but added that the market would likely test the CBE’s resolve in allowing market forces to determine the exchange rate. She said that the CBE’s moves could bring further upward moves in the FX, which would help the CBE to accumulate reserves and stabilize the macroeconomic situation.
Egypt secures external financing and ratings upgrade
The report also praised Egypt’s sources of external financing, which have secured its medium-term needs and reduced its vulnerability to shocks. The report cited the recent deals with the UAE, which involved a $20 billion investment in the Ras El Hekma project, and the IMF, which agreed to lend Egypt $8 billion in addition to the existing $12 billion loan.
The report also predicted that Moody’s, a credit rating agency, would remove its negative outlook on Egypt, and potentially upgrade it from Caa1 to B3. The report said that Moody’s decision would be based on Egypt’s improved fiscal and external positions, as well as its progress on structural reforms.
The report also expected further support for Egypt from the World Bank and the European Union, which would provide additional loans and grants for various sectors and projects. The report said that these sources of financing would boost Egypt’s growth and development prospects, and enhance its regional and global integration.
Egypt’s outlook remains positive, but challenges remain
The report concluded that Egypt’s outlook remained positive, but cautioned that challenges remained, especially in the political and social spheres. The report said that Egypt still faced security threats from terrorism and instability in the region, as well as social discontent from high inflation and unemployment.
The report also said that Egypt still needed to implement further reforms, such as improving the business environment, strengthening the banking sector, and diversifying the economy. The report said that these reforms would require political will and public support, which could be difficult to achieve in the current context.
The report also said that Egypt still needed to maintain a prudent and flexible monetary and exchange rate policy, which would balance the objectives of inflation control, growth promotion, and external stability. The report said that the CBE’s moves were a step in the right direction, but that more work was needed to ensure a sustainable and inclusive economic recovery.
