Fitch Ratings expects the dollar to rise against the Egyptian pound in the coming months, then to stabilize during the next fiscal year.
Fitch said, in its report on the Egyptian economy, which was published on its website, that it assumes that the exchange rate of the pound will decline significantly before stabilizing in June 2024.
This coincides with Fitch’s announcement to downgrade Egypt’s credit rating in both local and foreign currencies to “B” instead of “B+”, while maintaining a negative outlook.
The price of the pound against foreign currencies witnessed a significant decline over the past months since mid-2022, as the price of the dollar increased by about 96% against the pound, approaching the level of 31 pounds in banks currently, according to the official websites of the banks.
Fitch said that the shortage of foreign currencies appeared clearly in February 2023, while the official exchange rate stabilized after successive devaluations that led to the decline of the Egyptian pound against the dollar by about 50% compared to last year.
The institution indicated that this situation reflects the reluctance of market participants to deal in the foreign exchange market, due to the high degree of uncertainty about the level of the future exchange rate, in addition to interventions on the part of public sector banks, which further damages confidence in the permanent flexible exchange rate system. and the value of local and foreign currency.
Fitch stated that the growing mistrust regarding Egypt’s ability to meet its external financing needs results in a lack of confidence in a new exchange regime from the Central Bank and reflects the continued restrictions on market access, which has hindered foreign exchange inflows.
In the same regard, Standard & Poor’s expected, in a report last month, that the price of the dollar in Egypt would reach the level of 40 pounds at the end of next June. At the end of June 2024, then it will rise to 43 pounds at the end of June 2025.
