The report attributed this to Egypt’s record of economic and structural reforms, IMF-support programmes, high real interest rates, and a stable exchange rate.

On the other hand, inflation, the global financial-market conditions, and the country being dependent on external finance (loans) are eroding its attractiveness to foreign investors despite Egypt having the highest real interest rate in the region.

“Egypt has partly rebuilt its external financial buffers using non-resident inflows and other external funding. However, the sum of the Central Bank of Egypt’s (CBE) international reserves and its other foreign-currency assets remains slightly below pre-pandemic levels, and the CBE’s reserves are significantly lower than pre-pandemic. Bank net foreign assets have also become negative,” the report explained.

However, many factors still support Egypt’s external resilience, including its relationships with bilateral and multilateral lenders and access to non-market financing.

The report also indicated that another IMF programme for Egypt is likely, particularly if Egypt was faced with a liquidity shock amid the ongoing challenges.

In response to the first wave of the pandemic, the IMF approved two loans for Egypt under the fund’s rapid finance instrument and stand-by arrangement with a total value that exceeds $8 billion. The IMF handed Egypt the two loans in 2021. 

“Index inclusion and improvements to market structure will provide some structural support to investor demand. Current account deficit should moderate, with recovery in external demand and tourism. The government’s fiscal and economic reform agenda has not been dependent on the IMF programme and will likely continue,” the report pointed out.

In October, Fitch Ratings maintained Egypt’s long-term foreign-currency issuer default rating (IDR) at ‘B+’ with a stable outlook.

It attributed its decision to the country’s ongoing fiscal and economic reforms, as well as its large economy, which has proved its stability and resilience through the pandemic.

However, foreign direct investment (FDI) inflows into the Egyptian market declined in FY2020/2021 to reach $5.2 billion, down from the $7.5 billion recorded in FY2019/2020, as a result of the global pandemic-related challenges, according to the latest data published by the CBE.

The CBE’s Monetary Policy Committee is anticipated to hold its eighth and final meeting for 2021 to review the key interest rates soon.

Over the past seven meetings, the MPC maintained the CBE’s overnight deposit rate, overnight lending rate, and main operations rate at 8.25 percent, 9.25 percent, and 8.75 percent, respectively. The discount rate was also kept unchanged at 8.75 percent.

The rates have remained consistent since December 2020’s meeting, when the CBE cut interest rates by 0.5 percent (50 bps).