US bank Goldman Sachs said Egypt’s central bank needed $5 billion in unspent foreign exchange reserves to be able to manage the move to a more flexible exchange rate for the pound.
Egypt began moving to a flexible exchange rate system from March 2022 to cope with the effects of the Russian-Ukrainian war on the Egyptian and global economy, which led to the withdrawal of $ 22 billion of indirect foreign investment in a short period, which was reflected in the availability of foreign currency, causing a crisis shortages so far.
Egypt’s move to a more flexible exchange rate has led to a sharp drop in the value of the pound sterling, during which it has lost about half of its value over the past 15 months, while the dollar has appreciated against it by about 96% over this period, reaching about 30.94 £15.76 to sell at banks now compared to £15.76 on March 20, 2022, before the price of the currency changes.
A Goldman Sachs report titled “Egyptian Travel Notes: Under High Uncertainty,” of which Masravi obtained a copy, said that the value of the foreign exchange needed by the central bank to manage the transition to a flexible exchange rate could match the accumulation of import orders in Egyptian apparatus (letters of guarantee) has not been fulfilled), but is unlikely to satisfy the entire currency crisis in Egypt.
He added: “In fact, we have heard estimates from various parties indicating that the amount of import debt currently ranges from $15 billion to $18 billion, including foreign currency debt that the authorities have accumulated for various suppliers.”
Goldman Sachs said that assuming $5 billion, which it called a “war fund”, would be enough to move to a more flexible exchange rate regime, “where is that coming from? The answer on the ground is asset sales, the second pillar of the IMF program.”
He added: “It is clear from our conversations that an imminent increase (over the next month) in asset sales is expected, although there is very little data to judge the importance of these issues.”
The government intends to sell its shares in 32 companies, initially as part of a one-year government placement program it announced last February, and intends to raise $2 billion from the program before the end of the current fiscal year.
Source: Masravi