World Economy

Another Egypt Devaluation Inevitable

Another Egypt Devaluation Inevitable Another Egypt Devaluation Inevitable

As Egypt’s foreign currency shortage intensifies and the gap between official and unofficial currency rates widen, economists say another devaluation is inevitable this fiscal year, Reuters reported. Foreign currency inflows have been severely hit in import-dependent Egypt after a 2011 uprising drove away tourists and foreign investors, two major sources of hard currency.  The dollar shortage has stifled business activity and hit confidence in the Egyptian economy. Egypt devalued the pound by 13% in March in an effort to close the gap between the official and parallel rates but the move failed to boost dollar liquidity or close the gap. Reserves tumbled from $36 billion before the uprising to around $17.5 billion in May this year, and foreign currency reserves have been further drained this month as Egypt returned a $1 billion deposit to Qatar and paid $720 million in fees to the Paris Club. In May net foreign assets dropped to negative $9.4 billion, down from a surplus of $6.1 billion in the same month a year earlier.