Blog: You, us, everyone

The war in Ukraine generates some spillovers in Egypt: the already large current account deficit is expected to widen, with the country being somehow lacking, as of now, to attract sustainable forms of external financing. Consequently, the central bank is required to stick to flexible exchange rates in order to restore macroeconomic stability. According to some research data obtained, the EGY could drop by another 20% to 25 % within the next 18 to 24 months. That potential devaluation come on the top of a 15 % drop in March.

Longer-term, we have a very favorable view on the country. Why? On the hand, there are LNG sales to Europe to kick-in very soon – this is a highly promising business since Europe is desperate for it. Secondly, there a numerous Gulf state that promote investments in Egypt. This is not only supportive for the global economy but also help drive the various privatization projects. 

As given in a previous note, we do not see any major threat to the Egypt’s debt dynamic and debt structure. Future income, mostly from LNG sale, which will be used for servicing the debt held in foreign currencies. Additionally, a tight fiscal policy will help the government to keep the debt-to-GDP ratio trajectory towards 80 % of GDP by end FY2024.