5 Indicators that Reveal the Direction of Egypt’s Economy

Egypt’s economy is still in the midst of a family crisis, with currency depreciation, foreign exchange shortages and rising cost of living. It is an experience that is repeated only once every ten years. However, the resolution of the crisis of the accumulation of goods in the ports and the narrowing of the gap in the price of the dollar against the pound between the official and the parallel market may be signs of improvement.

Policy makers see it different this time, after a large group of promised reforms that will transform Egypt’s markets, its economy and perhaps society as a whole, according to Bloomberg, and News Agency they saw it, but that didn’t make it much easier to predict the end date of the current stage.

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A Bloomberg report identifies 5 indicators to watch that could show where things are heading.

The price of the dollar against the pound

The report states that, in compliance with a longstanding request from the IMF that helped secure the $3 billion deal has made Egypt’s currency more flexible. But long periods of stability were followed by bouts of volatility and a sharp decline in the pound.

And “Bloomberg” said that ending this uncertainty and showing the practice of using international reserves and foreign assets for banks to protect the pound has really been ignored and could be the key to almost solving the crisis. Investors will not put any more money in bonds or stocks if they can’t rule out another decline in the currency.

Some modest dips and rises over the next few weeks could be a sign that it’s reflecting supply and demand in more accurately. Furthermore, a steady recovery in some imports after delays at Egyptian ports have been resolved would show an improvement in foreign exchange inflows and ease pressure on the pound. But while steeper declines may be over, analysts at Standard Chartered and HSBC aren’t ruling out weakness quest’year.

debt levels

The days in which foreign investors held more than $30 billion of Egyptian domestic debt may be long gone, but a modest pick-up in foreign interest before next July will indicate that the country is on track to cover its immediate financial deficit.

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This comes as authorities target $2 billion in net inflows by then, a target likely hinged on investor confidence that the pound is not closely managed and that domestic bond yields aren’t negative when adjusted for inflation.

Arab investments

The report refers to the support of Egypt’s allies from the Gulf, after pledging to provide investments of more than 10 billion dollars.

That could mean the next big deal – likely to involve the sale of Egyptian state holdings in a large company to any of the Gulf states – could be a game changer, quickly followed by other transactions.

Government Offers Program

And at the heart of a recent IMF report, were lines that could be key to Egypt’s future: the promise to open a space for private sector participation.

Egypt has identified 32 state-owned companies in which it is selling stakes and the rapid movement of offers would be a positive step. The first sale will also be significant in absolute to a company like Wataniya, a fuel distribution company that operates a large network of gas stations.

inflation rates

On the other hand, accelerating inflation shows no sign of abating, as food prices rose at their fastest pace ever in January and the government says tackling inflation is a top priority.

The government is aware of the need to address the inflation problem. And when inflation starts to ease, perhaps not until the second half of 2023, that could provide some relief.

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