Morgan Stanley makes Egypt’s external account a derivative of the Strait of Hormuz
A sell-side scenario set published in Cairo on Friday ties the pound, the current account and a possible $4bn financing gap to a waterway 2,000km from Egyptian territory.
The Cairo financial daily Al-Mal reported on Friday 28 August, in its weekend foreign-exchange round-up, that Morgan Stanley considers Egypt’s external position to have proved more resilient than expected over the past five months. The bank then set out three scenarios for the Egyptian economy, framed explicitly around oil prices and navigation through the Strait of Hormuz. In the first, the strait reopens, shipping normalises and Brent settles at $65 a barrel in the second half of 2026 and $60 in 2027. In the third, oil stays higher for longer while foreign direct investment inflows stay weak, the current account deficit widens, and Egypt faces an external financing gap of up to $4bn. The second scenario was not described in the text retrieved. The dollar was stable against the pound across most Egyptian banks on Friday, which was a banking weekend.
The rate backdrop was set eight days earlier. On Thursday 20 August the Central Bank of Egypt’s Monetary Policy Committee held for a fourth consecutive meeting, leaving the overnight deposit rate at 19%, overnight lending at 20%, and both the main operation and discount rates at 19.5%. All six economists in a Bloomberg survey had predicted the hold. Bloomberg’s Mirette Magdy and Sherif Tarek framed the decision as rate policy set with “no end to Iran war in sight.” EgyptToday reported the committee’s reasoning included annual headline inflation rising to 14.9% in July.
Assessment: The scenario set is the most honest thing published about Egypt this month, and it is not flattering. A bank has told clients that the difference between a manageable deficit and a $4bn hole is a decision taken in Tehran, Washington or Jerusalem — none of them in Cairo. Note what is being attributed: this is Morgan Stanley via Al-Mal, not the note itself, and Al-Mal did not print a pound level, so treat “stable” as directional. The CBE’s fourth hold is the tell. A central bank confident in its own inflation path cuts; one waiting on a strait sits still.