Arab Finance: Egypt has favorable aspects to achieve medium-term growth; however, the huge external financing needs are weighing on its macroeconomic outlook, Asharq Business reported on March 28th, citing a report by Morgan Stanley.

The American institution also stressed the importance of achieving a progress in terms of structural reforms in the North African country.

Moreover, Morgan Stanley noted that the country could minimize its economic pressures through a “large-scale” privatization program as well as moving to a permanent exchange rate system.

In light of the devaluation of the Egyptian pound since the beginning of 2022, the state’s current account deficit is supposed to shrink, but the international financial leader sees a limited recovery in the official reserve account due to uncertainties related to the reform pace and the tight financial situation worldwide.

The report estimates that Egypt could sell assets worth up to $7 billion through asset sales by next year to boost foreign exchange (FX) liquidity and public finances, in addition, to narrowing its financing gap, which it pegs at $23 billion to $24 billion by the end of fiscal year (FY) 2023/2024.

“This in turn should tame further expectations of FX depreciation and ensure a smooth transition to a durably flexible regime, potentially lowering the bar for portfolio investors and buying time for the authorities to implement the structural reforms to level the playing field and boost FDI inflows further,” according to the report.

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