With an approaching agreement with the International Monetary Fund to obtain a new loan, according to Bloomberg Economic Agency, Egypt will permit the value of the pound to decline against the dollar at a faster rate than it is currently. This has caused its value to decline to the inequalistic futures for levels between 21 and 21 22 pounds.
After successful discussions at the expert level during which the components of the new programme were reached, Mohamed Moait, the minister of finance, announced the conclusion of negotiations with the International Monetary Fund on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Washington. He anticipated that the new loan agreement would be signed at a time very soon.
The new loan with the IMF is anticipated to be worth between $4 and $5 billion, and the minister of finance emphasised that the agreement would not entail the imposition of fresh austerity measures like what occurred in 2016. Instead, the fund would like structural reforms and exchange rate system control.
Bloomberg indicated in its report, until the approach of the signing of the fund’s agreement made bets there by investors that Egypt will allow more weakness, in the value of the pound, because the fund prefers to follow more flexibility in the exchange rate.
Additionally, the Egyptian government now favours a flexible exchange rate strategy and believes that it is the most suitable for the economy, according to earlier statements made by the Minister of Planning, Hala Al-Saeed.
Bloomberg expressed Gordon’s hopes. Powers, an analyst with Colombia Thridenidel Investments, said, “The value of the pound is likely to start the drop at a quick rate immediately, especially as it is the major stage to agree on the value of the new loan. The currency threatens to rise in prices and inflation.
The policy of a flexible exchange rate has been adopted since the new Central Bank Governor, Hassan Abdullah, arrived to lead the central bank and observe the value of the pound. The value of the pound was gradually depreciated against the dollar, fluctuating daily between 3 and 8 pounds until it reached 19.72 pounds, which is the highest level of the dollar ever.
The expectation was to provide a month versus the dollar at 21 in order to reduce the value of the pound at a quicker rate to its low value in decades.
By the time it was delivered after three months, it was worth 22. 9 pounds less.
Bloomberg expects that Egypt needs to reduce the value of its currency to 24. 6 pounds against the dollar in line with the high levels of the trade deficit..
Expectations are urgently accelerated in order to conclude the fund’s agreement.
About Author
