Saib reopens Mansoura branch after comprehensive renovation    ABE signs cooperation protocol to finance beneficiaries of state-owned lands in Minya    Suez Canal Bank partners with CRIF Egypt to advance sustainability through Synesgy    Russia hits Ukraine with huge barrage as first Australian tanks arrive    Russia unveils 'Kinzhal' interceptor drone to counter low-altitude threats    Lebanon's PM says US proposal includes full Israeli withdrawal, state control of arms    Sandoz Egypt introduces OMNITROPE 15mg biosimilar growth hormone for the treatment of short stature    Egypt After 2025: Navigating a Critical Inflection Point    Spot Gold, futures slips on Thursday, July 17th    Egypt's EHA, Huawei discuss enhanced digital health    Egypt expresses condolences to Iraq over fire tragedy    Egypt, Oman discuss environmental cooperation    Egyptian, Belarusian officials discuss drug registration, market access    Health Ministry denies claims of meningitis-related deaths among siblings    EU–US trade talks enter 'decisive phase', German politician says    Sri Lanka's expat remittances up in June '25    Egypt's Health Min. discusses drug localisation with Sandoz    Foreign, housing ministers discuss Egypt's role in African development push    Korea Culture Week in Egypt to blend K-Pop with traditional arts    Egypt, France FMs review Gaza ceasefire efforts, reconstruction    CIB finances Giza Pyramids Sound and Light Show redevelopment with EGP 963m loan    Greco-Roman tombs with hieroglyphic inscriptions discovered in Aswan    Egypt reveals heritage e-training portal    Three ancient rock-cut tombs discovered in Aswan    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Egypt's Irrigation Minister urges scientific cooperation to tackle water scarcity    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    Egypt's Democratic Generation Party Evaluates 84 Candidates Ahead of Parliamentary Vote    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Cabinet approves establishment of national medical tourism council to boost healthcare sector    Egypt's PM follows up on Julius Nyerere dam project in Tanzania    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



EGP likely to strengthen further over next 6 months: Fitch Solutions
Budget deficit will narrow to 6.9% of GDP in FY2019/20, government debt remains high
Published in Daily News Egypt on 18 - 08 - 2019

The Egyptian pound (EGP) will most likely see some further strength over the next 6
months, building on its 3.9% appreciation the dollar in the year-to-date, according to Fitch Solutions in its "Africa Monitor: North Africa" report recently released.
The report forecasts that EGP will make further gains against the dollar in 2019, ending the year at EGP 17 against the US dollar, down from EGP17.16 per US dollar at the time of preparing the report. However, the Egyptian currency will face some further upside pressure as the real interest
rate gap between Egypt and the US widens over the coming months.
Furthermore, Fitch Solution believes that since the devaluation, the impact of these movements has been dulled by the Central Bank of Egypt's (CBE) use of a ‘repatriation mechanism' – a facility that pays guaranteed foreign currency returns to debt investors from a dedicated share of currency reserves.
With this facility being eliminated for new investors since 4 December 2018, Fitch Solutions expects changes to Egypt's real interest rate to begin having a more material impact on currency inflows.
"CBE likely to step in to avoid a strong appreciation that could increase import demand and
damage the competitiveness of the manufacturing sector," the report asserted.
The pound is likely to slowly depreciate from 2020 onwards as real rates once again become
less attractive vis-à-vis the US, the report mentioned, adding that the pound's long-term depreciation to be gradual, forecasting it to finish at EGP 17.30 against US dollar in 2020, just 1.8% lower than end-2019 forecast.
Moreover, the report cites that trade tensions would continue to pose a danger to global growth, with the US Trump administration once again hardening its rhetoric against both China and the EU after months of relative calm.
Increased punitive measures could spark another bout of risk-off sentiment, which would hit emerging markets especially hard. Fitch Solutions expects that this would trigger some degree of capital flight from Egypt (especially of volatile short-term debt instruments) and exert downside pressure on the pound.
Moreover, the report expected Egypt's fiscal deficit to continue to narrow over the FY2019/20, noting, "We expect the budget shortfall for the fiscal year (ending June 30 2019) to come in at 8.5% of GDP. This is 0.6% points (pp) above our previous forecast, a revision we made due to the
government's decision to substantially hike public sector wages in February."
Fitch Solutions believes the deficit will narrow to 6.9% of GDP in FY2019/20 – well below the average of 10.2% observed between FY 2008/09 and 2017/18 – while the primary balance will remain positive.
According to the report spending restraint will contribute the most to the deficit's reduction, citing the government decision to implement another round of subsidy cuts in mid-2019, targeting petrol, diesel, kerosene and fuel oil which will bring domestic fuel prices in line with international ones.
The government expects these measures to reduce fuel subsidy costs by EGP 36bn in FY2019/20 – equivalent to 4.1% of total non-interest spending in the previous year – implying substantial savings, said the report.
On the other hand, strong revenue growth will also help slim deficits down, the report mentioned, noting, "the Egyptian economy continues to grow apace and we forecast real GDP growth to come in at 5.4% in FY2019/20, slightly above the 5.3% recorded in the past fiscal year."
However, Egypt's government debt remains high, standing at 89.5% of GDP by end FY 2017/18, while most of the government's debt (50.6%) has a maturity of or below one year, the report said.
Tax revenues should continue to grow at a healthy clip in FY2019/20, the report mentioned, adding that the government also plans to resume listing stakes in state-owned enterprises, with Minister of the Public Enterprise Sector, Hesham Tawfik, having said that, shares in eight to ten companies will come up for sale before end-2019.


Clic here to read the story from its source.