Despite a marked improvement in Egypt’s current account deficit, the pound’s de-facto peg is deterring critical capital inflows and adding to concerns over large external financing needs. A fresh devaluation and a commitment to a flexible exchange rate are paramount to getting Egypt’s IMF deal back on track, unlocking further financing from the Gulf, and attracting private capital inflows. If officials delay this much beyond the upcoming election, a more disorderly currency adjustment would probably lie in store.
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