Egypt’s pound will depreciate steadily against the dollar over the next 12 months, undermined by political and economic problems for the foreseeable future, a Reuters poll indicated on Wednesday.
A poll on African currencies suggested the pound will weaken to around 7.08 per dollar by this time next year, from current levels at 6.8177. The pound has lost almost 13 percent of its value in the past 12 months.
“It is a reflection of the weakness in the balance of payments, in light of the difficult political situation and economic situation,” said Reinhard Cluse, chief economist for Europe and CEEMEA at UBS.
“Egypt faces great difficulty in attracting the required capital from the current account deficit. That means they face an ongoing loss in foreign exchange reserves.”
Egypt aims to boost its foreign currency reserves to $16 billion by the end of June, offering a lower target than the government had previously announced.
The reserves stood at $13.5 billion at the end of February, barely enough to cover three months of imports for a country of 84 million that buys much of its food and fuel from abroad.
A delegation from the International Monetary Fund (IMF) has arrived in Egypt for talks on a $4.8 billion loan to ease an economic crisis in the most populous Arab country.
Cluse added that the absence of an IMF deal would entail more substantial risk for the exchange rate.
OTHERS
Among other currencies in the poll, South Africa’s rand is expected to hold a steady path after losing more than 19 percent in the past year.
It is expected to hold steady around 9.20 per dollar over the next 6 months before slightly firming to 9.00 in 12 months.
Large dual current account and fiscal deficits will continue to prevent the rand strengthening significantly.
The survey also found that Zambia’s kwacha will lose ground over the next year due against the dollar as the government raises spending on imports for infrastructure improvements.
The currencies of Kenya and Nigeria are similarly expected to weaken.
