Egypt’s Dollar Reserves Will Reach$90 Billion With The Entry Of Saudi Investment
Updates on Egyptian economic affairs presented in this episode of Samri Channel.
Goldman Sachs amazingly revised its forecasts for the future of the Egyptian budget from a deficit of about 13 billion dollars to a financing surplus of more than 26 billion dollars over the next four years. With expectations that foreign exchange reserves will rise to more than $60 billion by the end of 2027. The Investment Bank attributed the major change in its vision to the Ras El Hekma deal that Egypt signed with the UAE, the subsequent International Monetary Fund agreement at the staff level, and the subsequent announcement of a group of investments. Direct, which will change the overall picture of cash flows in foreign currencies to Egypt, with the exception of the continued widening of the current account deficit.
The current account is referred to as the indicator that measures the difference between exports and imports of goods, services, raw materials and other exported products, which can provide hard currency for the country, in addition to the difference between remittances and financial flows to and from the economy. It excludes funds invested in assets and financial market investments.
A current account deficit occurs when a country’s payments for providing goods and services are greater than its revenues from them during the measurement period. Goldman Sachs said, in a note prepared by analyst Farouk Soussa, that the presence of much stronger external financing sources, along with a larger financing package from the International Monetary Fund and its partners, will mean a surplus in external financing of up to $26.5 billion over the next four years. This compares favorably with expectations of a financing shortfall of $13 billion by Goldman Sachs before the latest developments. However, he expected the current account deficit to widen compared to previous expectations, with imports rising at a faster pace, only partially offset by an increase in remittances from Egyptians abroad.
It is expected that the deficit will expand to 2.5% of GDP by the end of 2027. Sousse expected that foreign direct investment into Egypt this year alone will reach more than $33 billion, and will rise faster than previous expectations as the overall situation stabilizes and investment in new projects recovers. . He also expected the return of investment portfolio flows this year, especially in the local market via hot money, or what is known as “Carry Trade.”
Widening trade deficit: While a decline in the official exchange rate may at first glance call for enhancing competitiveness and narrowing the trade balance, Goldman Sachs believes that the opposite is true for the following reasons: First, “there has been no effective devaluation of the currency due to marginalization.” “The extreme use of the official rate and the widespread use of the parallel rate for foreign currency transactions over the past two years.” The second reason is related to the continued strengthening of the pound in the coming weeks and months against the backdrop of strong foreign currency inflows.
Increased availability of foreign exchange would ease major constraints on import growth. Goldman Sachs also expects that increased foreign investment (especially in the real estate sector) will boost domestic demand in the medium term. We also expect strong growth in exports (with improved access to imported raw materials and components) but this will only partially offset import growth given the small volume of exports.
In its latest forecasts, Goldman Sachs believes that remittances from Egyptians abroad will witness a strong and sudden rise with the decline in the value of the pound and the rise in interest, to compensate for much of the widening trade deficit. Goldman Sachs pointed to the accumulated goods, which were estimated to be worth between $5 billion and $10 billion, according to local investment banks. Goldman Sachs believes that the current year may witness spending about $7 billion for this purpose, which is reflected in the outflow figures in current account or capital account payments.
