Managed exchange rate policy holds up parallel market in Egypt: Goldman Sachs
Updated 4/5/2023 8:19:00 AM
Arab Finance: The managed exchange rate policy has backed the continuation of the parallel market in Egypt, pushing the US dollar to trade against the pound at about 30% more than the official exchange rates, Asharq Business reported on April 4th, citing a note from Goldman Sachs.
In the note, Goldman Sachs said that financing options for Egypt have become limited in light of the difficulty in accessing the capital markets, as the Gulf governments prefer direct investment over lending, in addition to the International Monetary Fund’s (IMF) reluctance to provide more financing to Egypt.
These conditions force Egypt to push the pace of the agreed-upon reforms with the IMF, such as moving to a more flexible exchange rate, as well as slowing the pace of state investments and expanding the sale of government assets, the leading global investment banking firm noted.
Furthermore, Goldman Sachs added that a lack in foreign investment flows to Egypt exacerbates the current account deficit, pushes inflation higher, and leads to currency devaluation, which negatively impacts investors amid risks related to the country’s capability of settling its external debts.
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