The American international credit rating agency, Standard & Poor’s, has warned Egypt of the repercussions of the Egyptian pound’s depreciation, in light of escalating external risks.
In a report issued by it on Monday, the agency stated that the country’s exposure to the impact of external risks after the Ukraine war, with the pound depreciating by about 50% against the dollar since the beginning of 2022 until now, raised inflation rates and prompted the central bank to raise interest rates by 10% during the aforementioned period. to her. (One dollar = 30.85 pounds).
It also warned that Egypt is still subject to external pressures, which may produce more inflation and ultimately negatively affect the path of economic growth in the country, based on the fact that it increases the cost of financing, harms the credit quality of borrowers, and exacerbates the social inequality gap among the population.
It should be noted that last December, Egypt reached an agreement with the International Monetary Fund on a loan program with a total value of $3 billion over a period of 46 months, divided into 9 installments of equal value.
The country has already secured the first tranche of the program agreement. In recent weeks, it was supposed to get the second tranche, but the fund’s management says it is waiting until it discovers Egypt’s vision to implement the reforms it promised in the agreement, including the liberalization of the exchange rate and the privatization program that includes 32 government companies, a trend that is widely opposed.
Egypt, like many countries around the world, especially emerging countries, was affected by the consequences of the Russian invasion of Ukraine and the escalating hostilities there, apparently without a horizon for a solution so far.
One of the results of the ongoing Ukrainian war was the exit of large investment flows, in addition to Egypt’s dependence on the two warring parties, namely Ukraine and Russia, with 80% of its wheat imports, according to Standard & Poor’s in its report.