2023-08-07 09:39:47
Dollar and Egyptian pound (iStock)
Egypt’s economy
How does the exchange market move?
Cairo – Khaled Hosni
Posted on: August 07, 2023: 10:45 AM GST Last updated: August 07, 2023: 01:39 PM GST
In the framework of the positive news related to the exchange market in Egypt, the Central Bank of Egypt revealed the growth of net foreign exchange reserves during the month of July to $34.878 billion, an increase of regarding $72 million compared to June.
The cash reserves increased last June by $146 million to reach $34.806 billion, compared to $34.660 billion in the previous May.
The Monetary Policy Committee of the Central Bank of Egypt surprised the market by raising interest rates by 100 basis points at its meeting last Thursday, bringing the price of the one-night deposit and lending return and the price of the main operation of the Central Bank to 19.25%, 20.25% and 19.75%, respectively. The credit and discount rate was raised by 100 basis points to 19.75%.
The committee expected that inflation rates would reach their peak in the second half of 2023, before returning to the target and previously announced inflation rates, supported by the restrictive monetary policies so far.
pound drop
Egypt suffers from an ongoing crisis in the foreign exchange market as a result of the global shock caused by the Russian-Ukrainian war and the rise in interest rates. The pound has lost regarding half of its price once morest the dollar since March 2022, which led to the recovery of the black market for foreign currencies, and exacerbated pressures on foreign currency liquidity in the banking system.
However, the intensive moves announced by the government and the Central Bank of Egypt contained the shock and managed to end the crisis of cargo accumulation in Egyptian ports. As it was able to boost the imports of the tourism sector and the revenues of the Suez Canal Authority, it also boosted the pace of implementing the government offerings program and stimulated the return of foreign investments to the Egyptian market.
And in late July, the state-owned National Bank of Egypt and Banque Misr launched two new savings certificates in dollars in an attempt to shore up hard currency reserves. The National Bank expects to attract more than $4 billion in foreign currency through the new certificates.
In the context of following up the economic file, Egyptian President Abdel Fattah El-Sisi held, on Sunday, a meeting with the Egyptian Prime Minister, Dr. Mustafa Madbouly, the Governor of the Central Bank, Hassan Abdullah, the Minister of Planning and Economic Development, Dr. Hala Al-Saeed, and the Minister of International Cooperation, Dr. Rania Al-Mashat. And the Minister of Finance, Dr. Mohamed Maait, to discuss the measures taken during the last period to continue improving the overall indicators of the economy and attracting various investments, and efforts to cooperate with various international financing institutions to continue implementing the economic reform process.
Parallel market confusion
In the exchange market, and while the exchange rate of the dollar has remained stable since the beginning of the first quarter of this year, the parallel market is witnessing a state of confusion, with the absence of any official intervention in the exchange market by the Central Bank of Egypt.
Currently, the dollar is trading at 30.75 pounds for purchase and 30.85 pounds for sale, in the National Bank of Egypt and Banque Misr. In private banks, the US green paper is trading at 30.85 pounds for buying and 30.95 pounds for selling. At the Central Bank of Egypt, the average price of the dollar once morest the Egyptian pound recorded 30.84 pounds for purchase and 30.93 pounds for sale.
In the Arab world, the exchange rate of the Saudi riyal in the National Bank of Egypt and Banque Misr recorded a level of 8.19 pounds for purchase, and 8.22 pounds for sale. The exchange rate of the UAE dirham has also stabilized at 8.38 pounds for purchase, and 8.39 pounds for sale. The exchange rate of the Kuwaiti dinar recorded a level of 99.37 pounds for purchase and 100.41 pounds for sale.
On the black market, a state of confusion prevails, with no signs of a new devaluation of the Egyptian pound once morest the dollar, which caused a decline in demand by importers and a continued decline in the exchange of the US green note.
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