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Vol 58 No 5

Published 3rd March 2017


Egypt

Hot-money boost for economy

The Egyptian pound rallied strongly last month, but relying on short-term capital inflows also carries risks

When the Central Bank of Egypt (CBE) decided to float the currency at the start of November in order to unlock US$12 billion of finance from the International Monetary Fund, it would have had some notion about the likely market reaction but no certainty. Within a few weeks, the value of the Egyptian pound against the US dollar had fallen by about 55% and by the end of January, the core inflation rate had more than doubled, to 30%. The head of the IMF's Egypt mission, Chris Jarvis, conceded that both the extent of the devaluation and the inflation push had been greater than anticipated.

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