Egypt election concerns add to already high financing risks

The ruling Supreme Council of the Armed Forces’ (SCAF) dithering over securing external financial assistance has left Egypt teetering on the edge of a full-blown economic crisis. The central bank’s reserves are dangerously low and, without outside help, its support for the pound is unsustainable. If the new government fails to take action, a disorderly devaluation of the pound looks inevitable. Although this would boost exports in the long term, the immediate impact could be an increase in inflation, interest rates and the fiscal deficit. Combined with an uncertain global environment, Egypt’s near term economic conditions could deteriorate rapidly.