There are mounting concerns about the prospect of deficit monetisation in Egypt. Indeed, thereappears to be some evidence that the central bank is already financing the budget shortfall, albeiton a small scale. However, we think widespread deficit monetisation would only be used as a lastresort. Instead, we think that the authorities are likely to continue leaning on the banking sector topurchase government debt, although this will come at the cost of weaker private sector activity.
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