A Reuters poll showed that the Egyptian currency will weaken faster than expected, although inflation is likely to decline over the next few years.

The Egyptian pound, which traded at 19.61 against the dollar on Wednesday, is expected to decline to 21.16 by the end of the current fiscal year, and 22.08 by the end of the next fiscal year, according to a Reuters poll.

Last July, respondents expected a smaller decline of the pound to reach 19.86 per dollar by the end of the 2023-2024 fiscal year.

Increased exchange rate flexibility was cited as a condition for new financing that Egypt sought this year from the International Monetary Fund, at a time when the Russian-Ukrainian war increased pressure on the country's public finances.

Foreign investors pulled about $20 billion from the Egyptian treasury market within weeks, while rising oil and grain prices added to the pressure.

gradual decline

Egypt began allowing its currency to depreciate last March, when it was trading at 15.70 pounds to the dollar, and the IMF and Egypt said this week that an agreement on a new loan was imminent.

"In light of inflationary pressures, we believe the authorities will continue to allow the currency to depreciate at a slow and gradual rate, rather than opting for a sudden devaluation," said Cali Davis of Oxford Economics.

And last September, inflation in Egypt rose to its highest level in 4 years at 15%.


Economists expected the inflation level to decline in the coming years, to reach 12.8% by the end of the current fiscal year (June 2023), and to 11.6 percent in the following year.

However, those expectations are higher than they were last July, when forecasts were 10% and 10.4% over the next two years.

slowing down demand

For her part, Chief Economist at Al Baraka Bank, Mona Badir, said that the high expectations are based on pressures on the Egyptian currency and the uncertainty about global energy and food prices, which are largely driven by the war.

High inflation rates and a weak currency cast a shadow over economists' expectations for growth in Egypt, which fell below 6.6% during the fiscal year that ended last June.

Experts expected a growth of 5.4% in the current fiscal year, and 5% in 2023-2024.

The government said it aims to achieve 5.5% growth.

For her part, Davis - who expected a slowdown in demand in the second half of next year - said, "With inflation expected to remain high in the coming months, domestic demand conditions will be weak."

Given the continued weakness of growth, economists' expectations about unemployment varied, but they expected the lending rate to be stable at 12.25% in the current fiscal year.