Favourable economic winds help Egypt as Pound depreciates to court investors

Egypt will likely avoid the inflationary implications of a weaker currency as the pound depreciates ahead of a much anticipated investor conference in March, economists said.

The Central Bank of Egypt allowed the pound to depreciate three times this week, the first such move for six months. The pound reached 7.29 per dollar on Tuesday on the official market, while the black market rate averaged 7.856 per dollar, according to two traders.

Depreciation has long been feared amid concerns it could lead to an uncontrollable rise of prices across the economy, since Egypt is a net importer of goods, but analysts say that those fears are unlikely to be realised in the immediate future.

Favourable circumstances, mainly the fall in oil prices globally, means that the cost of imported goods is dropping, Hany Genena, chief economist at investment bank Pharos Holding said. Oil prices have fallen to $48.99 a barrel on Tuesday for Brent on oversupply and weak demand from Europe and Asia.

Egyptian households have seen their expenses grow after the government partially removed fuel subsidies in July, raising prices at the pump by up to 78 percent – leading to a hike in the general price level in the economy. Inflation spiked to 11.8 percent in October before easing to 10.13 percent in December.

No official comments were announced regarding the change in policy, but analysts see it as an effort to boost foreign reserves, investments and Egypt's competitiveness in exports markets.