Egypt edging closer to pound devaluation

The Egyptian central bank has found itself in the spotlight this month, as attention has (re-)focussed on the country’s fragile external position. The appointment of TarekAmer as governor had already sparked speculation that policymakers were gearing up to devalue the currency and the decision to postpone the latest monetary policy meeting by a week (until 24th December) has simply added fuel to the fire. Letting the currency fall will clearly result in some temporary pain – inflation would rise further. But, as we’ve argued many times before, it would also enable the central bank to dismantle FX restrictions, encourage foreign investors back to the country, and boost Egypt’s external competitiveness, all of which should support growth.