In the wake of loans worth $5 billion from Qatar and Libya, the greenback has eased on the local foreign exchange market to less than LE7. The US dollar may fall further versus the Egyptian pound if the Government gets more cash from donors or other lenders, analysts say, citing a possible loan from the International Monetary Fund (IMF). On Sunday, the US dollar took a blow by the Central Bank of Egypt (CBE), which pumped $600 million into the market in a bid to put an end to speculation. The move also battered the country's black market of the US currency as the dollar fell to LE6.8 from LE7.5. But no-one can give exact forecasts of what the coming months may bring due to political unrest, analysts say. “No-one can forecast as the US dollar/pound correlation remains a complicated game," Mohamed Assem, a Cairo-based trader, told the Egyptian Mail. As speculation on the greenback takes a break, there would a chance for the bourse to get more cash as investors “might target easy gains" from stocks, according to Assem. “Stocks will get more liquidity now that investors quit speculation on foreign exchange," Assem said. Following the 600-million-dollar injection, the CBE announced similar auctions “may be repeated" according to market needs. Months ago, analysts argued if the pound was under devaluation pressure imposed by the IMF. The $5 billion financial facility could be the kiss of life for the cash-strapped economy. But it is estimated that Egypt needs roughly $12 billion of investment inflows and state revenues to bridge the gap in the deficit and ease the financial drought. The economy remains in a deadlock as budget deficit seems to be widening and public debt on the rise. The budget deficit remains the country's most nagging dilemma as it is forecast to hit 11 per cent of gross domestic product (GDP), adding more inflationary pressures. However, the budget deficit is not a new occurrence. For almost four decades, budget deficits have been chronic symptoms plaguing Egypt's economy. In the fiscal year 1987/1988, the budget deficit rose to a historic record high at 33.5 per cent of GDP. Foreign debts back in 1987 totalled $42.3 billion, accounting for an all-time high at 173.1 per cent of GDP, according to World Bank figures. The cost of government borrowing from local banks has jumped to 16 per cent. As state revenues hardly cover 65 per cent of government spending. Borrowing seems to be inevitable. A budget deficit has to be financed through issuing government debt to domestic or overseas investors. Consequently, if the budget deficit rises to a high level, the government may have to offer higher interest rates to attract buyers of public debt. The Hisham Qandil cabinet is doomed to face other economic challenges in the coming months. Foreign reserves at the CBE, unemployment and inflation. Foreign reserves stood at $13.4 billion at the end of March. The reserves are under a threat to take a dive if world oil prices rise. The reserves hit $36 billion in December 2010. The toughest challenge would be the creation of jobs. This time bomb could blow up anytime. In 2011, unemployment stoked the January 25 Revolution that toppled Hosni Mubarak. Prime Minister Qandil has vowed to create 700,000 jobs by June 2013. More than 800,000 job seekers are added each year. Unemployment is estimated at 13 per cent, according to the state-run Central Agency for Public Mobilisation and Statistics (CAPMAS). Unofficial reports estimate the number of jobless at more than 8 million.
