Egypt Independent

Hermes projects US dollar at LE15 by the end of 2017



EFG Hermes investment bank is expecting improvement in the Egyptian pound exchange rate by the end of the current year '2017', in addition to a predicted increase in foreign direct investments.
 
A report by the investment bank projected the US dollar exchange rate at LE14.5- LE15 by the end of 2017, compared to the LE19 currently in banks, Al-Borsa news said.
 
Egypt abandoned its peg of 8.8 Egyptian pounds to the US dollar on November 3, floating the currency in a bold move that has since seen it roughly halve in value. The move helped it secure a US$12 billion loan program from the International Monetary Fund.
 
Egypt's dollar peg had drained the central bank's foreign reserves, which have been hit by reduced foreign investments following political turmoil in the past few years, forcing the bank to impose capital controls and ration dollars.
 
EFG Hermes projects that foreign direct investments will reach US$8.3 billion in the next fiscal year 2017/2018, and that an exchange of Egyptian pounds for a fair value would attract more foreign investments.
 
The flotation of the pound and other structural reforms will lead to rebalancing of the Egyptian economy, boosting the growth in total investments during the fiscal year 2017/2018, the report said.
 
The report went on to explain that investment had dried up over the past years due to the political turmoil; shortages in foreign currency; and high consumption levels due to assessing the pound higher than its real price over the last period.
 
This year is expected to be good in terms of operating rates for industrial companies, in light of the resolution of the problem of the US dollar exchange rate and the stability of supplies of energy for the industrial facilities; but margins of profit may be negatively affected by the high costs of production and the difficulty of passing the increase in prices to the consumer.