Egypt not out of the woods after IMF rescue deal

Egypt not out of the woods after IMF rescue deal

CAIRO/LONDON - Egypt's finances remain in a precarious state despite two major currency devaluations this year and a brand new $3 billion International Monetary Fund rescue package, economists say.

With debt interest payments set to soak up over 40% of the government's revenues next year and a lack of foreign currency still hurting the economy, investors remain cautious despite a post-IMF bounce in sentiment.

Bankers in north Africa's largest economy point out that the Egyptian pound's black market rate of 26-26.5 per dollar is still 8% below the 24.53 official rate despite a 36% overall devaluation this year.

Foreign exchange traders, meanwhile, seem convinced it will be 28 to the dollar this time next year and Japanese bank Nomura has just put Egypt top of its list of countries at high risk of a currency crisis..

"The Egyptian pound will likely remain under pressure until more U.S. dollar inflows from GCC (Gulf nations) and committed foreign direct investment materialises," said Carla Slim at Standard Chartered Bank.

Last month's IMF deal has provided some respite.

Egypt's soon-to-pay-out government bonds have rallied some 15% and the premiums demanded by investors to hold them rather than U.S. Treasuries have shrunk by almost a third.

Bonds that won't have to be