On November 5, in Cairo, International Monetary Fund experts began the procedures for the fourth review of the economy Egyptian As part of an $8 billion loan from the international lender to the Cairo government, the value of… Pound The Egyptian market remarkably went from about 48.70 pounds at the end of last October, to about 49.23 pounds to buy, and 49.37 to sell, according to prices. Central Banklast Thursday.
But experts, analysts, observers, and traders agreed that the pound had declined further, and were unable to determine its value, while they confirmed that the “black” or (parallel) market, which had shrunk significantly for about 6 months, since the last floatation of the local currency last March, The pound fell from a rate of 31 to about 48 against the dollar, and it will return again.
Some of the experts who spoke to “Arabi 21”, or those who polled their opinions in the Egyptian street, believe that there are global and local influences, leading to the decline of the pound, the largest since the liberalization of the exchange rate in the first quarter of 2024, with the return of the black market, and the occurrence of a new gap. In the local exchange market, between the official and parallel market.
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They said that Donald Trump’s victory as the 47th President of the United States, and his return to the White House for a second term until 2028, strengthens the strength of the dollar against the world’s currencies and thus against the pound, explaining that the current expectations about a decline in gold prices globally are also offset by a strengthening of the value of the dollar. Globally.
And in a symposium The Egyptian Center for Economic StudiesOn the eve of Cairo last Wednesday, Egyptian experts expressed their expectations that the local markets would witness a rise in the price of the dollar, with the strengthening of the strength of the American currency prompted by the return of Donald Trump to the White House.
“Madbouly’s statements and the Central Bank’s decisions”
Locally, Prime Minister Mostafa Madbouly announced last Wednesday that the exchange rate is up to “supply and demand,” indicating the possibility that the government will remove its hand from controlling the dollar exchange rate, which, according to their view, means a certain decline in the value of the pound against foreign currencies.
Madbouly called on citizens, the private sector, and companies to “place their trust in state institutions and ensure that they will not interfere in this matter in the future,” adding: “I know that the prevailing impression among Egyptians is that the state is the one that controls the price of the currency.”
In addition, observers confirmed that matters will become clearer with the results of the fourth review, hinting at the possibility that the Fund will demand more flexibility in the government’s dealings with foreign currencies, which will also lead to a decline in the value of the pound.
Last Monday, the Central Bank of Egypt allowed banks to finance 13 recreational and non-essential goods that required prior approval before distributing dollars to customers, after it re-restricted their financing last September, to avoid depleting the banks’ dollar proceeds.
In this context, the Central Bank decided last Thursday to allow the import of cars from abroad and banks to open documentary credits for importers, in decisions that coincide with the visit of International Monetary Fund Director Kristalina Georgieva to Egypt last Sunday.
This indicates that the Egyptian government has somewhat removed its hand from controlling the managed price of the dollar against the pound, and strengthens the possibilities of increasing demand for hard currency at Egyptian banks.
According to the view of bankers, this is a government easing of restrictions on the dollar, which contradicts Cairo’s previous approach to reduce pressure on the foreign currency and limit the aggravation of the foreign exchange crisis and the spread of the black market for currency trade, since the crisis of foreign exchange scarcity in the first quarter of 2022, and the escape of about 20 billion dollars. Hot money from the local market.
“black market”
In addition, some expected that, in return, there would be greater activity than before on the black market to meet the needs of importers, with the possibility of a shortage of hard currency in banks.
Black market traders said that prices for the first time in months exceeded the official price, and they expected the matter to continue, while traders believed that the dollar would reach 60 pounds in the parallel market.
Friday’s numbers confirm that the selling price of the dollar reached 49.36 pounds, and 49.61 for the purchase price, while the price of the dollar in the goldsmiths market reached 49.84 pounds, which is less than the black market prices, which range between 49.50 and 49.60 pounds per dollar, according to confirmation of merchants and dealers. Expect a new rise at the beginning of the week’s trading.
“Debts… and a harsh repayment schedule.”
Experts spoke about the impact of the external debt crisis in deepening the pound’s crisis and its decline against the dollar, explaining that what Egypt is required to pay as a service for the debt is large, in conjunction with the recent decline in the tender file, and the decline in Suez Canal revenues by 70 percent due to regional tensions, according to statements by the head of the IMF, Last Sunday.
While the volume of external debt officially during the first half of the current year amounted to $152.9 billion, the World Bank revealed on October 24 last the schedule for repaying Egypt’s external debt in the current fiscal year, as it requires repayment of $60.8 billion from last July until June. / June 2025.
The Central Bank must also repay $20.8 billion in deposits during the current fiscal year, and repay bonds worth $3.3 billion, while the repayment schedule includes loans worth $31.04 billion from various parties, in addition to repaying $21.7 billion in the next fiscal year (2025- 2026), according to the World Bank schedule.
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At a symposium of the Egyptian Center for Studies EconomicSpeakers expected an increase in demand for the dollar, with the maturity of many of the interests and installments of the external debt, which represents 90 percent of the gross domestic product, in the previous fiscal year, according to the confirmation of the Egyptian Prime Minister, in his speech to reporters from the New Administrative Capital, last Wednesday.
Zilla Capital Executive Partner, Omar El-Shenety, said that there are financial obligations in large numbers on Egypt until the end of 2025, pointing out that the cost of debt rose last October, after the decline it witnessed during the last period, which is linked to the vision of… Investors of the market, the stability of the exchange rate, and what is happening in the region.
Egyptian experts spoke to “Arabi 21” about the most important indicators of the decline of the pound against the dollar and the reasons for this, the expected rates of decline, the possibilities of the recovery of the black market, and the impact of this on the Egyptian citizen.
“The crisis of every review”
The President of the European Academy of Islamic Finance and Economics, Dr. Ashraf Dawaba, said, “The economic vision says that Egypt is heading either to reduce the local currency against foreign currencies or to a new float, following the float last March.”
The Egyptian academic and head of finance and economics at Istanbul University explained, “This trend comes as a natural result of its government’s urgent needs for hard currency, and this is completely clear with the successive indicators and numbers that confirm the country’s need for foreign exchange.”
He believes that “this matter is repeated and not new there because the issue has been expected since the International Monetary Fund approved the three billion loan in December 2022, and then raised its value by 5 billion once to become 8 billion last March.”
He stated, “At each stage of the loan, which is preceded by a review of the Egyptian economy by the Fund and then the disbursement of a tranche, it is expected that with the fourth review and disbursement of the fourth tranche worth $1.3 billion, the economy and the Egyptian citizen will be exposed to the same problem, with the possibility of a decline in the value of the pound against foreign currencies.” “.
“Message to the Fund and Hot Money”
In his belief, Egyptian economic expert Dr. Abdel Nabi Abdel Muttalib said, “The decline in the value of the pound is merely a message sent by monetary policy makers and directed by the government to more than one party that it is pursuing flexible exchange rate policies, that there is no stability in the exchange rate, and that there is no intervention by the central bank in the market.” “Currency”.
The former Egyptian official in the Ministry of Industry and Trade pointed out that “Egypt today has a foreign exchange reserve of more than 46 billion dollars, and there are directives from the Central Bank to banks to provide the financing required to import all goods, including non-essential goods.”
He sees “the issue of the decline in the value of the pound against the dollar in a successive manner over the past two weeks as a message to the International Monetary Fund, and part of it is an attempt to prepare the economic community to accept a dollar price ranging between 50 to 55 pounds per dollar, without government intervention, a float, or a decision from the Central Bank, so that it leaves The dollar increases and decreases by 10 percent of its value, which means 5 pounds, and it may range from 47 or 49 to 52 or 53 pounds, or between 50 and 55.”
Regarding the possibilities of recovery of the parallel market, he said, “The black market has not disappeared, but it is not what it was before, as it was between November 2023, and until last February, when there was a black market in the truest sense of the word, and everyone was trading in the dollar.” Owners of exchange companies, ordinary people, and those who had money to invest, and the dollar turned into an investment commodity that reached 75 pounds in a previous period.”
He stressed that “the parallel market or exchange market outside the official market always exists, but it is within a narrow range, and previously, there was a large demand from importers trying to meet their need for cash from that market in a demand of several billion, but now we are talking about meager numbers that do not exceed $100 million, a number that does not lead to the emergence of a black market on the scale it was previously.”
He believes that “the previously mentioned indicators reveal the possibilities of movement in the price of the dollar, and whether or not there is a black market,” but the Egyptian expert downplayed the possibilities of a major movement.
He said, “What is happening now is that this decline in the value of the pound was not matched by a rise in commodity prices. Rather, perhaps some commodities that reached ridiculous prices began to stabilize or decline in price. This is the indicator that says that there is no black market as it was before.”
He returned to expressing his fears that “the government will issue a set of decisions that will restrict imports or limit the financing of certain imports, such as feed imports, which directly affect all forms of food, starting with eggs and white meat, as well as some other imported foodstuffs, most notably sugar.”
He continued: “In the absence of any new rules restricting the movement of imports, I believe that the suffering of the citizen who is already suffering will not add much to it, and it will not be as much as he experienced in 2022 and 2023.”
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Regarding the impact of debt service on the availability of foreign currencies, he said: “It is known that we have a schedule for paying interest and installments and that the government was finding difficulties in arranging foreign exchange resources to pay debt service; but under the current circumstances, Egypt has what it can use to meet these obligations without… There will be problems or delays, in addition to indications of the sale of public assets, tourist areas, etc., which means dollar cash flows that eliminate the foreign exchange problem.”
He concluded by saying: “The decline in the price of the pound now, part of it is directed to international institutions, and part of it is directed to foreign investors in hot money, that the pound is falling and the dollar is rising, and that this is an opportunity for investment.”
He added: “Especially since every stage has a rebound point, and the dollar today is about 50 pounds and is expected to reach 55 pounds, but it will not last 4 or 5 years at this level, but the stabilization phase will begin later, and the rebound phase will begin, as happened in 2017 and 2019, after the 2016 flotation.” “From the decline and stability of the value of the dollar.”
He concluded his speech with the expectation: “The dollar will return again to touch between 40 and 45 pounds per dollar, and in this way the investor will have gained in addition to the interest rate in Egypt. The difference between the exchange rate from 55 pounds to 45 pounds means a gain of 10 pounds per dollar, in addition to His profits from investment.
