Egypt’s Currency Urgency

Egypt’s Currency Urgency

Pressure is building on Egypt’s economy, prompting the world’s biggest banks to say the North African nation will need to weaken its currency further.

A greater flexibility in the pound has emerged as an issue for Egypt as the government looks to clinch a new loan from the International Monetary Fund. Deutsche Bank, Goldman Sachs and Citigroup say the currency is too expensive, even after a devaluation of more than 15% in March.

Soaring oil and commodity prices have hit one of the world’s largest wheat importers hard, as has the loss of tourists from Russia and Ukraine. Inflation in urban parts of Egypt quickened in July after a month of cooling off, as rising food prices and a local hike in fuel costs added more pressure to consumers.

July’s figure may give the central bank further impetus to raise interest rates when it meets on Aug. 18. Markets will also be looking out for any signs that the central bank is preparing to let the currency fall further after global investors pulled billions of dollars from Egypt’s debt market this year.

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Meantime, the government is taking other steps to shore up its