Egypt’s banking sector can breathe easier in 2024, thinks Fitch Solutions: Foreign currency inflows and exchange rate stability following the float of the EGP in March and the country securing some USD 57 bn in financing in 2024 have improved Fitch Solutions’ forecasts for Egypt’s banking sector, writes Al Borsa

Remittances and portfolio investments have been picking back up and strengthening the nation’s foreign asset position: Fitch also gave a nod to the decreasing difficulties involved in repatriating funds and increased returns on Egyptian debt instruments as a reason behind the return of portfolio investments and remittance inflows. This has contributed to the net foreign asset deficit narrowing 87% since reaching an all-time high of USD 29.0 bn in January.

An uptick FX liquidity should have a knock-on effect on imports, arrears, and FX lending: Fitch expects banks to direct the uptick in inflows towards those importing non-essential goods and tackle any import backlogs, in addition to making arrear payments to oil companies and increase FX lending to companies.

Also in Fitch’s crystal ball:

  • Inflation: Fitch sees inflation rates ending the year at just over 25%.
  • Interest rates: The CBE’s tightening cycle has ended for now, thinks Fitch, with interest rates expected to stay at their current levels until the end of 2024.
  • The EGP float will have a limited impact on the balance sheets and capital position of Egyptian banks, Fitch thinks, with the sector able to absorb the rise of the greenback against the EGP by about 35%.
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