The fiscal targets in the $12 billion Fund agreement have been met despite the steep headline deficit, with a 2% primary surplus expected this year on higher tax collection. Food prices, and electricity and fuel tariff hikes with subsidy reduction, are the main inflation drivers. The currency is firm at around 17.5/dollar, and the central bank recently cut interest rates 100 basis points. The inflation goal is 9% by year-end with additional 3% leeway, and foreign investment in local government paper may double to $20 billion should it be within reach, but the more likely scenario is position unwinding that in turn weakens the pound. The current account gap will come in around 2% of GDP despite Zohr gas field production and tourism revenue approaching its pre-Arab Spring peak, with slumping Gulf remittances and expanding import appetite. Egyptian representatives conceded these points during the Bretton Woods meetings week but countered that the domestic consumption could draw on a large 85 million population as reported unemployment fell to a decade low of 9%. Standard Chartered Bank echoed these views in a January review, predicting Egypt’s ascent to a top 10 global economy in 2030, with $8 trillion in output as Africa’s giant.

Bank balance sheets revived the past five years with Moody’s Ratings assigning a positive outlook, with a 15% increase projected this year. Bad loans at 4.5% of portfolios are one-quarter the amount a decade ago, and capital adequacy is 15% of assets, according to 2018 figures. The loan/deposit ratio is low and local currency deposits are three-quarters of the total. Only 30% of citizens have formal accounts, and greater financial inclusion is to be achieved through digital and technological outreach under a joint industry-regulatory framework. Retail and Islamic lending are promising lines to match trends in neighboring countries, with the youth demographic inviting consumer credit. However, one-third of bank assets remain concentrated in government securities, and default or restructuring as widely feared before the IMF program may again be contemplated with exit over the coming months.