Egypt: IMF expects limited EGP/USD fluctuation, closed official-parallel markets gap
Despite the increase in FX inflows due to the Ras El-Hekma deal, the IMF highlighted that high inflation differentials and widening current account deficit will likely keep generating depreciation pressures.
The fund highlighted that the Central Bank of Egypt (CBE) applied a flexible exchange rate regime in March 2024, which continued to yield positive results.
The CBE's policy closed the gap between the official exchange rate and the parallel market and eliminated the backlogs of unmet import demands, which boosted trading in the interbank market.
The IMF noted that continuous vigilance will be necessary to ensure that this reform is consolidated further over time so that economic agents perceive the exchange rate as truly flexible.
Moreover, the report underlined that the CBE did not intervene since the unification to influence the rate, except for select episodes of purchases for reserve accumulation under the program.
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