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Tuesday, 1 November 2016

Pigat sees IMF agreement in early 2017, larger devaluation requirement, 20% inflation in 2017

Egypt’s agreement with the IMF could “theoretically be in early 2017,” Jean-Paul Pigat, senior economist at Emirates NBD, told Bloomberg TV’s Manus Cranny, despite his initial projection of an agreement in “early November.” Pigat is concerned about the developments in the currency market, saying that when the IMF first reached an agreement with Egypt, the parallel market’s premium over the official exchange rate was around 40%, which has since widened to “around 85%. … So, obviously, the assumptions that the IMF was working with back then might need to get changed,” he explains. “When we were previously talking about a devaluation of around 20% to restore investor confidence, that number might now be a lot larger.” On inflation, Pigat said it is the parallel market that matters as it is “where a lot of Egyptian people and businesses are basically going for foreign exchange.” Looking into 2017, he tells Cranny he expects inflation rates can “easily” go up to around 20% and links it to the possibility of the CBE having to implement a “quite aggressive” interest rate hike as a response. (Watch, runtime 02:55).

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