This marks an upward revision from the bank's previous forecast, which positioned the exchange rate at EGP 35-40 per $1 for Q1 2024
Analysts at HSBC projected that the Egyptian pound will undergo another devaluation in the first quarter of 2024, anticipating rates to reach EGP 40-45 against the US dollar, according to a report by the bank on Friday.
This marks an upward revision from the bank's previous forecast, which positioned the exchange rate at EGP 35-40 per $1 for Q1 2024.
HSBC emphasized that the change in the exchange rate is part of a broader transition toward a more flexible exchange rate regime.
“This adjustment is also expected to facilitate the completion of the long-awaited first review of the International Monetary Fund's reform program,” HSBC added.
The bank’s forecast shares a similar outlook with recent reports from EFG Hermes and Fitch Solutions' research unit BMI.
At the end of November, BMI revealed that it expected the EGP to depreciate to 40-45 against the USD in February 2024, and predicts no further interest rate increases by the Central Bank of Egypt (CBE) until next year. The CBE’s next meeting is scheduled for December 21.
EFG Hermes believes that the EGP will fall to EGP 40 against the USD as an “eventual area of stability for the EGP when the FX market clears”. Mohamed Abu Basha, lead MENA economist at EFG Hermes, shared in a note to clients in early November that he sees evidence that foreign currency was accumulating in the economy and that the pound’s adjustments could be coming to an end.
The Egyptian government unveiled a plan to attract $191 billion annually within three years to enhance liquidity in the local market and address the challenges posed by foreign exchange shortage.
