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'Hot money' singes Egypt’s economy

Although capital outflows are no surprise, devaluation looks imminent to mitigate pressure on the pound.
LUDOVIC MARIN/AFP via Getty Images

Against the backdrop of the Russia-Ukraine conflict, outflows of "hot money" — funds controlled by investors seeking short-term returns, often moving money between countries to profit from varying interest rates — have triggered massive demand for the greenback in Egypt, making another devaluation of the pound a necessity.

Although outflows of hot money should come as no surprise as fund managers opt for safe havens in times of crisis, there are concerns about an exodus from emerging markets, including Egypt, which may face a number of financial and economic challenges in the short and medium terms.

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