Al Saraf made his remarks in response to Ahram Online's questions on the extent to which high interest and inflation rates in Egypt could affect investors' appetite for the market amid the spillovers from the ongoing regional tensions in the Middle East.
The remarks came during a pre-briefing the British bank held in Cairo to launch its report on the global and Egyptian economic outlook.
Al Saraf added that Egypt’s efforts to settle outstanding arrears owed to international oil companies (IOCs) could strengthen investor confidence and improve the country’s external balances by encouraging greater domestic energy production.
Al Saraf noted that while Egypt continues to benefit from robust remittance inflows and tourism revenues, the petroleum trade balance remains the main source of pressure on the current account, as the country has become a net energy importer.
He described recent progress in clearing IOC arrears as a significant positive development, arguing that the economic cost of repaying these obligations is substantially lower than the potential loss of investment and production if energy companies scale back operations.
“Settling these arrears should incentivize international energy companies to expand domestic production, helping Egypt reduce energy imports and easing pressure on the current account over the medium term,” he said.
Although higher global oil prices may continue to weigh on the petroleum balance in the near term, increased local production would help cushion the impact and improve Egypt’s external position, Al Saraf added.
Commenting on investor sentiment, he said markets are likely to remain comfortable with moderate inflation increases as long as they stem from identifiable factors such as higher food and energy prices and do not trigger excessive volatility.
However, he cautioned that investor confidence could be tested if inflationary pressures force the Central Bank of Egypt (CBE) to take more aggressive monetary policy measures.
Al Saraf said the CBE has so far demonstrated confidence in its inflation-management strategy, pointing to the central bank’s consistent communication and acknowledgement of inflation risks.
He added that Egypt’s positive real interest rates, estimated at around 400-500 basis points, provide an important buffer against inflationary pressures and help preserve the attractiveness of Egyptian assets.
“The stability of Egypt’s monetary policy framework remains a key factor underpinning investor appetite,” Al Saraf said.
In response to Ahram Online's question on Egypt’s expected fiscal gap, Al Saraf noted that the bank projected it at 7.5 percent of GDP in FY2025/2026, before narrowing to seven percent in the upcoming fiscal year.
He also expected the exchange rate to weaken to around EGP 49/$1 by the end of 2026 and projected Egypt’s financing requirements at around $8-9 billion in the upcoming fiscal year.
Al Saraf also revealed that total outflows from the Egyptian market since the start of the US-Iran war were estimated at up to $12 billion so far.
For his part, Philippe Dauba-Pantanacce, global head of geopolitical analysis and senior economist at Standard Chartered, said the risk of a renewed full-scale conflict between Iran and the United States remains limited despite recent military exchanges, with both sides appearing more inclined to pursue a negotiated settlement.
Dauba-Pantanacce described the current situation as one of “no peace, no war,” noting that while sporadic exchanges of fire have continued despite the ceasefire announced in April, ongoing diplomatic contacts suggest neither side is seeking a return to active conflict.
“On balance, we believe there are more incentives for both Iran and the US to reach a deal than to resume full-scale fighting,” he said.
According to Dauba-Pantanacce, the main obstacle is not the substance of a potential agreement but finding a politically acceptable framework that allows both sides to claim success domestically.
He noted that the contours of a possible agreement are already well understood, pointing to the 2015 nuclear deal as a precedent, but stressed that political considerations remain the key challenge.
The geopolitical analyst also highlighted broader lessons from recent conflicts, arguing that military superiority alone no longer guarantees decisive outcomes in modern warfare.
“Recent conflicts have demonstrated that even the world’s strongest militaries can face prolonged challenges in asymmetric wars,” he said, citing ongoing global conflicts as examples of how smaller or less powerful actors can sustain resistance against larger opponents.
Dauba-Pantanacce added that the conflict has reinforced concerns over the vulnerability of strategic trade routes, particularly the Strait of Hormuz, a critical artery for global energy supplies.
Even if tensions eventually subside, he said, global markets are likely to view the waterway differently, with heightened awareness of the risks posed by potential disruptions to energy shipments.
Looking beyond the Middle East, Dauba-Pantanacce said investors are increasingly focusing on the upcoming US midterm elections, which could reshape the political landscape in Washington and potentially constrain President Donald Trump’s ability to advance parts of his agenda.
He noted that a shift in the balance of power in Congress could mark the beginning of a new phase for the US administration, adding another layer of uncertainty to the global geopolitical outlook.
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