Crunch time for Egypt

Egypt’s talks this week with the IMF over a $3.2 billion package could prove to be a defining moment in the post-Mubarak era. With FX reserves now at dangerously low levels, external financing is needed to avoid a disorderly devaluation of the pound, which would have significant ramifications for the country’s banking system and public finances. Splits between the government and parliament mean that talks are unlikely to be easy, but with few other options on the table we think a deal will ultimately be done with the IMF.