The improvement in Egypt’s macroeconomic stability since March’s policy shift has resulted in a surge in capital inflows on a similar scale to that which followed the 2016 devaluation. But if signs emerge that the authorities are delaying reforms, there’s a risk that foreign investment dries up and the pound comes under renewed downward pressure. While the central bank can call upon (now larger) FX reserves to support the currency, a return to a heavily-managed exchange rate would worry investors and may also call into question the IMF’s and the Gulf’s willingness to provide further financing.
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