Despite the current disarray in the financial markets Egypt has shown once again that it is a reliable investment for Investors looking for returns in the bond market. The Egyptian pound has appreciated against the dollar by 1.2% in the past 2 weeks. This comes as investment continues to flow into the country’s economy primarily through asset managers and trading houses taking bullish positions in the country’s most liquid bonds , Front-end treasury bills . Due to the pandemic foreign reserves have fallen by $1.9Bn since March, however offset slightly by the sheer volume of T-bill purchases – $3Bn in the past month alone.
Financial markets must always maintain equilibrium. The downside of the pound’s appreciation is witnessed by a fall in exports which plummeted by 37% in April (partly due to a global decrease in demand due to the pandemic).The strengthening exchange rate is great for investors in the financial markets however acts as a deterrence for businesses who buy their goods from Egypt. The main exports are natural gas, petroleum products, cotton fabrics and foods. The majority of which can be sourced easily from neighboring countries so the risk here is that Egyptian exporters loses a significant amount of their regular import partners. The lack of Central Bank response suggests they are comfortable with the current situation as the downturn in exports is balanced by the appetite for Egyptian assets. A further note of confidence is that local businesses will be financially supported by the $5.2Bn IMF loan.