CAIRO, March 7 (Reuters) – Egyptian officials said they expected more inflows and the pound held steady on Thursday, a day after the central bank announced a shift to a more flexible exchange rate and let the currency plunge as Egypt secured an expanded $8 billion IMF programme.
The shortage has curbed local business activity and led to backlogs at ports and delays in the government’s payments for commodities including wheat.
Prime Minister Mostafa Madbouly said Egypt was planning on big deals to ensure liquidity and would work with merchants to stabilise prices and prioritise foreign currency access for basic commodity importers as the currency shift takes effect.
Egypt expected a total of $20 billion from multilateral and other partners including the IMF, the World Bank and the European Union, Finance Minister Mohamed Maait said.
The government was also committed to a programme to sell state assets and encourage private sector investment.
“We are expecting to execute several deals in the various strategic sectors for an amount close to $3.5 billion,” Maait told the American Chamber of Commerce in Cairo. “We are expecting more financing to come through over the short term.”
Egypt’s international bonds, which had soared on Wednesday before falling back, declined further on Thursday, with the 2033 note down 1.62 cents on the dollar at 81.81 cents, Tradeweb data showed.
Overall, Egypt’s sovereign bond prices were trading at early March levels.
‘ENOUGH AND MORE’
Egypt has promised a move to a more flexible exchange rate system in the past, only to resume holding the currency at a fixed rate, while much of the economy depended on a black market rate that fell as low as 70 pounds.
Central bank Governor Hassan Abdalla described the black market trading as a “disease” that reflected a lack of trust in the financial system.
“Thankfully, I can stand here today and say we have enough to fulfil our obligations and more,” he told reporters at a rare press conference late on Wednesday.
The central bank would still have the ability to intervene, as in other countries, in the case of excess volatility, Abdalla said.
Under the programme, Egypt has committed to undertake structural reforms to stabilise prices, manage the debt burden and encourage private-sector growth.
Abdalla said that following a 600 basis point hike on Wednesday, Egyptian interest rates, long among the highest globally, would now be on a “downward track.”
‘IRON FIST’
Two weeks ago, Egypt signed an investment deal with Emirati sovereign fund ADQ that includes $24 billion payment for rights to develop a prime stretch of Mediterranean coastline.
It also includes the conversion of $11 billion in existing deposits to be used for unspecified projects across Egypt. The Egyptian government said the total of $35 billion would be transferred within two months.
Since early 2022, when the foreign currency shortage worsened, the pound has now lost more than two-thirds of its value against the dollar in a series of staggered devaluations.
Remittances from Egyptians working abroad, the country’s top single source of foreign currency, slowed sharply last year amid expectations that the pound would fall.
Madbouly said on Thursday that the interior ministry would use an “iron fist” against traders who were channelling remittances outside the banking system.
Sign up here.
Reporting by Nafisa Eltahir, Nayera Abdallah, Tala Ramadan, and Jorgelina do Rosario; Writing by Aidan Lewis; Editing by Tomasz Janowski, Andrew Cawthorne and Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
