Saudi Arabia’s Public Investment Fund has stepped up investments into Egypt this week that will help to ease external financing concerns. At the same time, electricity rationing will begin next week to free up more natural gas (which Egypt relies on for power) for export in an effort to narrow the large current account deficit. However, these measures will only provide a short-term reprieve and a weaker pound and steps to attract more direct investment will be key to putting the external position on a more sustainable footing. Meanwhile, rising inflation is likely to prompt the Central Bank of Egypt to resume its tightening cycle with a 50bp hike, to 11.75%, next Thursday.
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