IMF Egypt Review: CBE succeeded in managing FX shortage

CAIRO – 26 September 2017: The Central Bank of Egypt (CBE) has succeeded in mitigating foreign currency shortages, stabilizing exchange rates and eliminating the parallel dollar market, the International Monetary Fund (IMF) said its Tuesday staff report review.

“The foreign exchange (FX) market normalized after the float, but the depreciation was larger than expected,” the IMF said, stressing that the parallel market has virtually disappeared and central bank reserves have increased significantly.

The pound’s flotation came later than anticipated as a result of excess liquidity and continued uncertainty over FX backlogs, the IMF noted.

The unification of the exchange rate and elimination of FX shortages has attracted informal trade into formal channels, the IMF said, adding that this was reflected in strengthening the trade balance. “The current account deficit in FY 2016/17 is expected to reach 5.8 percent of GDP, which is 0.6 percentage points of GDP more than in the program,” it said.

Egypt’s economic reform measures were welcomed by foreign investors as Eurobond sales in January and May brought in $7 billion, leading to large inflows, the IMF added.