Egypt’s mediation role in the Israel-Hamas conflict in Gaza is expected to attract foreign financial support, exceeding $5 billion, according to Fitch Solutions’ BMI. Inflation is expected to slow down, while interest rates may increase to support the local currency. Egypt is also in talks with the IMF for new financing.
The Head of MENA Country Risk at Fitch Solutions, Ramona Moubarak, also anticipates funding from bilateral sources, such as the European Union, for development projects aimed at job creation and reducing migration. Furthermore, she expects Egypt to reach a financing agreement with the IMF in H1 2024, facilitating access to additional funding. However, this may result in a higher debt-to-GDP ratio. Moubarak also suggests that Egypt’s central bank may secure new deposits from regional allies. Additionally, she foresees a flexible approach from the IMF regarding Egypt’s currency commitments.
“If the IMF increases the funding allocated to Egypt from the current level of 5.9 percent times its quota to 10 times matching that of Argentina, the Fund’s direct funding to Egypt would reach about $8 billion, Moubarak stated.
“When we say it will waive the requirements of a flexible exchange rate, this means the currency will still be adjusted. And we see that happening in late March 2024, or early second quarter of 2024 (April-June)”, Moubarak added.
By then, Egypt’s inflation will be slower, touching mid-20 percent, with the local currency going down to a range of EGP 40-45 per 1 USD. It could also reach EGP 50 per 1 USD, as she expected.
Moubarak made her remarks during a webinar held on Tuesday by BMI, a subsidiary of Fitch Solutions, discussing key macro themes in the MENA region for 2024.
