Page 15 - Issue-65
P. 15
Vol 1 - issue 65 ELITE
Abdelrahman Sakr
Third level-economics
HOT MONEY, Foreign Direct investment, Exports
, AND EGYPT’S Political economy
“We have learned from our mistake The IMF stressed that Egypt must
and won’t rely on hot money again”, adhere to the flexible exchange rate
said Dr. Mohamed Maait, in July 2022, policy in the third review in late July
during the hustle of the outflow of hot 2024, which signaled that the EGP may
money from Egypt and currency fall against the USD, against what
devaluation. Dr. Maait was mainly investors expected a few months ago.
doing his government’s main policy, Another reason of uncertainty is
paying lip service. Two years later and geopolitical risk. The fear of a regional
still Egypt depends, though less war is kicking investors out of the
excessively, on hot money. Although country as they fear Egypt will not be
Dr. Maait is no longer in charge, his able to meet its obligations. The war in
policy of dependence on hot money Gaza has already harmed Egypt by
and excessive external borrowing still dampening its current account deficit,
throws its weight over the country as due to the slump of Suez Canal
he left behind him a huge pile of debt revenues, which decreased by 23.4%
and witnessed the return of hot money on yearly basis.
in March 2024. Although the amount of the outflow
The latest net outflow of hot money was small, around 8% of total
in the beginning of August was caused available foreign currency, and that
mainly by two factors. First, the fear of the EGP fell against the USD by only
recession in the US, which drove 2%, the event highlights the
investors to stock their investments in government’s failure since 2016 to
safe assets, particularly US Treasury adopt structural reforms to increase
bonds. Second, uncertainty regarding foreign direct investment and
the Egyptian economy fueled. decrease the current account deficit,
Sept. 2024, p.15
