International institutions expect the dollar to reach these levels after the floatation of the Egyptian pound

© Reuters. – Sources reported to local Egyptian newspapers a short while ago that Egypt is about to receive a first installment of about $1.5 billion from the loan agreed upon by the International Monetary Fund, after the agreement reached last week, which amounts to $8 billion.

The sources explained, in exclusive statements to Al-Mal newspaper, that this payment is expected to be disbursed in the coming weeks, and will include the first and second review tranches that were previously postponed.

Egypt had received a first installment of the loan worth $350 million after signing an agreement worth $3 billion at the end of 2022, but the implementation of the first and second reviews of the program was postponed until the International Fund announced its completion last week.

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This comes after the Central Bank of Egypt announced, in an extraordinary meeting held on Wednesday, a sudden increase in prices in Egypt by 6%, or 600 basis points, bringing interest rates to the level of 27.75%.

While the Central Bank of Egypt also decided to liberalize the exchange rate of the Egyptian pound against foreign currencies at the same meeting, as it decided to allow the exchange rate of the pound to be determined according to market mechanisms.

A more flexible exchange rate, long a key demand of the International Monetary Fund, is crucial to restoring investor confidence in an economy that has faltered over the past two years due to foreign currency shortages.

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Meanwhile, international banks and institutions predicted the levels at which it would move against the pound during the coming period after the Central Bank announced that it would leave the issue of setting the price to market mechanisms.

The British bank HSBC maintained its previous expectations that the exchange rate of the pound against the dollar would stabilize in the range of 40 and 45 pounds until the end of the current year 2024, after liberalizing the exchange rate. The bank suggested that the dollar flows would lead to the flow of funds through official channels and put an end to the parallel market.

At the same time, the Institute of International Finance expects that the average exchange rate of the pound will reach about 33.5 against the dollar in the current fiscal year 2023/2024, which ends next June, according to the “Eqtisad Al-Sharq” website. While the institute expected that the average price of the dollar would reach 42.5 pounds to the dollar in the fiscal year 2024/2025.

While the American investment bank, Morgan Stanley, expected that the exchange rate of the pound against the dollar would stabilize at about 45 pounds during the next two months after the decision to liberalize the exchange rate.

JPMorgan expected on Monday that the central bank would raise the key interest rate by another 200 basis points later this month amid indications that inflation is heading to an “unprecedented level” after the significant devaluation of the currency.

Egypt’s consumer price inflation reading for February showed the largest monthly rise ever, jumping 11.4 percent from 1.6 percent in January, which far exceeded economists’ expectations.

“We now expect another 200 basis point increase in the deposit rate at the next meeting, which could be held later this month according to the (Central Bank of Egypt) schedule,” analysts at JP Morgan said in a research note.

They added that they no longer see “any scope” for interest rate cuts until February 2025.

During these moments of trading today, Tuesday, the dollar is moving against the Egyptian pound around the level of 49 pounds per dollar in Egyptian banks.

While the dollar on the black market in Egypt reaches the level of 50 pounds, according to data available on the Investing Saudi website.


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