Expectations about a new official devaluation of the Egyptian pound before the end of the current fiscal year have declined, according to a report issued by the US leading bank Citigroup.
Contrary to expert expectations, which suggest that the interest rate in Egypt will be raised and the Egyptian pound will be devalued against the US dollar, Citigroup’s Wednesday report stated that this step may be postponed for a month or two.
This means it may not take place during the current fiscal year, ending on June 30.
Bloomberg quoted the head of Central Europe, Middle East, and Africa (CEMEA) strategy at Citigroup Luis Costa as saying that a sharp depreciation of the pound before the end of the fiscal year may hinder the government’s goal of a budget deficit of 6.5 percent and hinder the stability of the country’s debt relative to GDP.
Costa believes that the central bank would likely wait for tourism revenues of about US$14 billion to reach the joints of the economy before deciding on the need for another repricing of the pound.
He added that Citigroup’s strategy is to sell the dollar against the Egyptian currency in the non-deliverable forward market for a period of one month, based on expectations that the pound will not be depreciated before the end of the current fiscal year.
While derivatives used to hedge risks or to speculate indicated that a fourth currency devaluation was imminent in Egypt since March 2022, traders have reduced those bets in the past two weeks, he added.
The pound traded in the one-month non-deliverable futures market around 32.9 per dollar on Thursday, recovering from an all-time closing low of 35.3 on April 25.
“In comparison, the pound’s 12-month contract was at 43.3 per dollar, signaling expectations of a steep devaluation eventually,” Bloomberg stated.
The Egyptian pound price has been officially fixed in Egypt at about LE30.9 since March 20, after losing about half of its value since March 21, 2022.