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Sunday, 30 August 2020

The Planning Ministry likes what the int’l Egypt-watchers have to say on the EGP, foreign reserves

The Planning Ministry likes what the int’l Egypt-watchers have to say on the EGP, foreign reserves: The Planning Ministry is out with a summary (pdf) of international opinion on the trajectory of the EGP and foreign reserves in the months and years ahead as the economy begins to recover from the covid-19 shock. Despite foreign investors dumping more than half their holdings of EGP bonds amid a record-breaking EM sell-off in March and April, the EGP held up well through the height of the financial panic, losing just 3% of its value between March and June. Reserves took an almost USD 10 bn hit, falling from USD 45.5 bn in Febuary to USD 36 bn in May.

An EGP rebound: Both Capital Economics and the Economist have forecast increased currency stability going forward. Capital Economics notes that the EGP has risen 2% against the greenback since July while the Economist is projecting the currency to rise 6.4% against the USD to EGP 15.74 by 2024. Fitch, meanwhile, said that the EGP has been one of the best performing EM currencies and expects it to remain stable until through the rest of 2020.

But it’s going to take a while for foreign reserves to recover: The IMF is projecting foreign reserves to slowly recover this year, rising to USD 40.1 bn by the end of the current fiscal year, and reaching USD 51 bn by the middle of the decade. The Economist sees the buildup of reserves accelerating in the beginning of 2022 after the tourism, export and services sectors fully recover from the pandemic.

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