Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Egypt has had a problem with debt for quite some time. Since the Second World War, the

country has typically run a trade deficit, importing more than they export. This has been partially

offset by transfers from abroad, such as aid from foreign governments and remittances from

Egyptians working in other countries. Tourism has additionally been an important source

of foreign exchange for the country, with millions visiting Egypt each year,

mostly from Europe, Asia and other Arab countries.

In 2016, the Egyptian President Sisi sealed a deal with the IMF for a 12 billion dollar loan.

This bailout was granted on the condition that Egypt's currency would float freely.

The Egyptian pound halved in value in a matter of weeks, causing inflation to rocket.

Harsh austerity measures were implemented, including cuts to energy subsidies, to try and restore

government finances.

Everything was going reasonably well until the pandemic hit in 2020.

This destroyed the tourism industry, an important source of foreign exchange.

The central bank began propping up the Egyptian pound from June 2020 up until March 2022, repeating the same mistakes

that had led to the prior to valuation.

Once the central bank stopped supporting the currency, it began its decline.

Egypt is the Arab world's most populous nation with 109 million people, and it's the world's biggest

importer of wheat. When Russia invaded Ukraine, the shortage of wheat, combined with other

soaring commodity prices, caused real problems in Egypt. The country reached a $3 billion loan

deal with the IMF last October, after again agreeing

to let the forces of supply and demand determine the value of the Egyptian pound in the

...