“The large devaluation of the currency and increase in interest rates will likely help Egypt maintain an upsized IMF program, reduce the risk of a renewed build-up of external imbalances, and strengthen the economy's shock resilience"
The report emphasized the need to watch for sustained moves toward more FX flexibility, anticipating positive outcomes like increased FX inflows, reserve accumulation, and macroeconomic stabilization.
Gbolahan Taiwao at JPMorgan expressed optimism in a note to clients, stating, “The Egypt carry trade is back in focus, and this time should be different.”
Despite the CBE's currency adjustment causing a significant drop of 62% in the local currency against the USD, the pound demonstrated resilience and remained stable 24 hours after the float.
The CBE's bold decision on Tuesday to raise interest rates by 6% sent and allow the weakening of the EGP sent shockwaves through the economy, triggering a series of significant events that is expected to shape the financial landscape in the days to come
