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‘Worst is behind us’ in Egypt’s black market dollar war says BMI

A square in Cairo Creative Commons/ Gilbert Sopakuwa
The worries are almost over in Egypt’s long-running battle to eradicate the parallel dollar market, BMI says
  • Official rate close to parallel market price
  • GDP predicted to grow 3.2%
  • Interest rate rise in 2024 ‘not expected’

The Egyptian government’s priority for 2024 should be to keep the gap between the official and parallel exchange rates for Egypt’s pound and the US dollar as narrow as possible, says BMI Research.

In a webinar on Tuesday BMI, a Fitch Group firm specialised in country risk, said that “the worst is behind us” in Egypt’s long-running battle to eradicate a parallel dollar market under which the dollar traded hands for more than double the official exchange rate with the Egyptian pound back in February.

The pound is now officially trading at 48 against the dollar and 49 on the parallel market, after the depreciation of its official value by 36 percent last month.



BMI described the current discrepancy in markets as “broadly narrow” and said it believes the government was waiting for the shocks in the market after Iran’s recent attack on Israel to die away before closing the gap between the official and parallel markets completely.

It said it saw Egypt’s pound strengthening against the dollar with the disbursement of multinational and binational finance packages, and holding steady at between 47 and 48 to the US currency through to the end of 2024.

Ramona Moubarak, BMI’s head of Middle East and North Africa country risk and global banking, struck a cautious tone, predicting that Egypt’s GDP would grow 3.2 percent in the financial year 2023/24, rising to 4.2 percent in 2024/25, largely driven by private consumption.

“Elevated inflation, high borrowing costs, and [Egypt’s] challenging operating environment will all weigh on economic activity,” she said.

The volatile political environment in the wider region, the risk of increased escalation in regional hostilities, negatively affected sentiment and an increased local demand for US dollars were all causes for concern, Moubarak said.

She said she did not expect interest rates to rise in 2024 as the authorities want to avoid “adding more pressure on public finances and economic activity”. 

Inflation could be more difficult to predict, Moubarak said. Official reports of rising costs in February suggested that the market had already priced in the increased cost of the dollar through the black market before last month’s devaluation of the Egyptian pound. In this scenario, BMI predicts average inflation for 2024 of 32.5 percent.

“Otherwise, if we see a pickup in inflation in the coming month, then this will be a factor of food inflation on a higher trajectory, leading to a higher inflation rate as well,” Moubarak said.

Faster growth

BMI said that the Mena region will be one of only two, along with sub-Saharan Africa, to record faster growth in 2024. The increase will be spread unevenly, with the Levant likely to record flat growth overall. The economy of the Palestine Territories is expected to contract by 20 percent and Lebanon’s economy by 0.5 percent.

The region’s overall 2.6 percent growth will be fuelled by the GCC, where economies are expected to grow by 2.7 percent, against 0.8 percent last year. Much of this will result from the stabilisation of oil production after a nearly 4 percent contraction in 2023. 

BMI also expects the non-oil economy to grow and is particularly bullish about the UAE and Saudi Arabia, where it predicts the non-oil economies will grow by 5 percent and 3.8 percent respectively.

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