Dubai, United Arab Emirates (CNN) – The dollar rose again against the Egyptian pound, exceeding 30 pounds in local banks with the beginning of this week’s trading, after the Central Bank applied a permanently flexible exchange rate policy. On the other hand, real estate development companies recorded growth in sales during a year. 2022, due to the tendency of citizens to invest their money in real estate, as it is a safe haven for savings.
Egypt faced a severe crisis in securing foreign exchange following the exit of indirect foreign investments estimated at more than $20 billion, and a decrease in tourism revenues in the aftermath of the Russian-Ukrainian war, which led to a decline in foreign exchange reserves from the level of $40.98 billion in January 2022 to 34 billion dollars by the end of the same year.
Aya Zuhair, head of the research department at Zila Capital, said that fluctuation in the price of the dollar against the Egyptian pound is expected after the Central Bank of Egypt applied a permanently flexible exchange rate system, which results in a continuous decrease or increase in the exchange rate of the pound against foreign currencies. , until it settles at a fair price, which is expected to reach it during the second half of this year.
At the end of last October, the Central Bank of Egypt adopted a permanently flexible exchange rate system, as part of a new economic reform program agreed upon with the International Monetary Fund, which led to a decline in the pound against the dollar, which recorded 30.48 pounds for purchase, and 30.58 pounds for purchase. For sale at the Central Bank of Egypt, Sunday.
Zuhair explained, in exclusive statements to CNN in Arabic, the mechanisms for the pound to reach a fair price against the dollar, through the implementation of the government offering program by selling shares to 32 state-owned companies on the Egyptian Stock Exchange, which would result in an increase in state revenues, and the implementation of the economic reform program agreed upon with the Fund. International monetary, obtaining new tranches of the Fund’s loan, attracting foreign direct investment, in addition to controlling high inflation rates.
Last Wednesday, the Egyptian Prime Minister, Mostafa Madbouly, announced the offering of stakes in 32 state-owned companies over the course of a full year, whether through the Egyptian Stock Exchange or a strategic investor or both, in implementation of the state ownership policy document that was approved to increase the private sector’s contribution to the Egyptian economy.
Aya Zuhair indicated that Egypt’s agreement to obtain a loan from the International Monetary Fund will not be quickly reflected in the price of the pound, but rather requires the implementation of the provisions of the economic reform program agreed upon with the fund, and an increase in the state’s dollar resources from tourism and foreign direct investment to achieve stability in the exchange rate. .
At the end of last year, Egypt agreed with the International Monetary Fund on a new economic reform program to obtain a $3 billion loan. Government indebtedness to GDP is expected to decline to levels of less than 80% of GDP in the medium term, according to an official statement.
Banking expert Hani Aboul Fotouh agreed with her, that the drop in the pound’s price against the dollar was expected in light of the application of a flexible exchange rate system, with the high demand for foreign currency, and the lack of an increase in the state’s foreign exchange resources, noting that the pound has fallen by a large percentage against the dollar since March. March of last year, however, it declined this time by 0.4%, with a value of only 13 piasters against the dollar, at the end of last week.
The dollar increased from 15.6 pounds last March to more than 30.5 pounds at the end of last week, according to data from the Central Bank of Egypt.
In exclusive statements to CNN in Arabic, Aboul Fotouh pledged to determine the exchange rates during the coming period with several variables, most notably the completion of huge deals on local companies, whether owned by the state or the private sector, the increase in state revenues from tourism, and the remittances of Egyptians abroad, with the continued improvement of Suez Canal revenue flows. Pointing out that completing deals and injecting new investments is linked to the stability of the pound’s exchange rate against the dollar.
In another context, Tarek Shoukry, head of the Real Estate Development Chamber of the Federation of Egyptian Industries, said that real estate companies recorded huge sales during the year 2022, thanks to the tendency of citizens to invest in real estate as a safe haven for savings, and to face the challenges that faced the global and local economies, most notably the Russian-Ukrainian war, and the devaluation of the pound. in front of the dollar.
According to a report by The Board Consulting Consulting Company, sales of the 5 largest real estate development companies in Egypt recorded EGP 143 billion ($4.1 billion) in 2022.
Shoukry suggested, in exclusive statements to CNN in Arabic, that the sales of real estate development companies will continue to grow during the current year at the same rates as last year, with the continued increase in prices, but at a much lower pace than that witnessed last year, which may reach 10% this year compared to 60% last year. In the past, linking the increase in real estate prices to the repercussions of the Russian-Ukrainian war and its impact on the global economy.
However, he pointed to the impact of the increase in the cost of building materials as a result of the depreciation of the pound on the profitability margins of real estate development companies, especially companies that sold during the past years and were late in implementing units, as these companies will incur losses from the difference in selling units at the time they are offered for reservation, and the cost of implementing them at the present time. , which rose significantly as a result of the increase in iron prices, and the depreciation of the pound against the dollar.
The prices of building materials have increased dramatically during the last period as a result of the pound’s decline against the dollar. The price of a ton of iron has approached the level of 30,000 pounds ($983.34) for some major companies, and the price of cement has reached 2,000 pounds ($65.56).
And he continued that small real estate companies that do not own new land areas for development will be exposed to huge problems as a result of the price difference from the time of selling the units, and the cost price at the present time, indicating that the Real Estate Development Chamber is currently working with the government to activate real estate financing so that the unit becomes the guarantee. To obtain financing, in order to increase sales in light of the low purchasing power of citizens.
In March 2021, the Central Bank of Egypt allocated an amount of 100 billion pounds ($3.3 billion) as an initiative to finance the purchase of housing units, at 5% interest for low-income people, and 8% for middle-income people, before the government decided last November to stop renewing The initiative and transferring its affiliation to the Ministry of Housing so that it does not bear a cost to the state’s general budget.
Abeer Essam, a member of the Board of Directors of the Real Estate Development Chamber of the Federation of Egyptian Industries, said that citizens turned to real estate investment during the past year to preserve the value of their savings in light of the pound’s decline against the dollar, which caused all real estate development companies, whether small or large, to exceed sales targets during 2022.
Essam explained, in exclusive statements to CNN in Arabic, that the successful real estate development companies that worked to speed up the development of projects through financing from customer advances and installments, which avoided the problem of the price difference between the date of selling the unit and the time of its implementation, expecting continued sales growth during this year in The Ramadan season, which witnesses offers from real estate companies, and during the summer months coinciding with the return of Egyptians from abroad for a vacation.
Abeer Essam indicated that the high cost of building materials prompted real estate development companies to update the feasibility study of the implemented projects monthly to coincide with the change in cost, and accordingly re-set prices on a quarterly basis instead of every year in the past.