The Central Bank of Egypt and difficult decisions to confront the currency crisis (The New Arab)
A Archyde.com poll of analysts conducted today, Tuesday, showed that the main inflation rate in Egypt likely accelerated in November, following the devaluation of the currency in October and continued restrictions on imports led to a renewal. bullish pressures on prices.
The median forecast of 14 analysts showed that annual inflation reached 18.75% in November, up from 16.2% in October and the highest level since December 2017.
Jaap Meyer, head of research at Arqaam Capital, attributed the rapid increase in prices to “high import bills”.
imposed central bank restrictions on imports in February, before the Ukraine crisis, and started a trend, which he refrained from for more than two years, towards Devaluation of the currency, as of March. On October 27, the bank devalued the Egyptian pound by 14.5%, and has allowed it to depreciate gradually since then.
“The currency has moved 25% from where it was a year ago, and that would add 2.5-5 percentage points in any country, and the rise has reached ten percentage points,” said Charles Robertson, chief economist at Renaissance Capital.
Robertson went on to say: “So the foreign exchange rate is probably responsible for a third of (the rise in prices) compared to what it was a year ago, oil probably a fifth and world wheat prices at least a tenth. Two-thirds of the rise can easily be traced back to the Egyptian pound and oil.” and food until the end of October 2022.”
Analysts polled had expected core inflation to jump to 21.60% from 19% in October.
Rising inflation would put pressure on the central bank to raise interest rates at its next meeting on December 22nd.
On Thursday, the Central Agency for Public Mobilization and Statistics will release inflation data for November.
Coinciding with the opinion poll conducted by Archyde.com, the famous Masrawy website quoted Egyptian bankers as expecting the Central Bank of Egypt to hold an extraordinary meeting soon to take a “bold” package of economic decisions to control the exchange market and curb inflation, before the International Monetary Fund meeting to discuss final approval of the agreement. Submit loan to Egypt in the amount of three billion dollars.
Egypt appeared on the agenda of the International Monetary Fund’s meetings, and the next Friday, December 16, was set for the meeting of the Fund’s Executive Board, in order to discuss the fate of the final approval of financing the program of cooperation with Egypt in economic reform, which was initially agreed upon at the level of experts, according to experts. What the fund published on its website.
The bankers, who spoke to Masrawy, suggested that the decisions expected to be issued by the Central Bank at its upcoming extraordinary meeting would include a liberalization of the pound’s price once morest foreign currencies, with the aim of reaching an agreement with the International Monetary Fund on the fair price of the pound once morest the dollar, according to the Egyptian website.
And Hassan Abdullah, the governor of the Central Bank of Egypt, had announced during a press conference before the end of last October, “determining the price of the pound once morest the dollar according to supply and demand,” which led to a 25% decline in the pound once morest the dollar during the month that followed the announcement of the decision. .
Bankers also expect that the Central Bank, coinciding with the liberalization of the pound exchange rate, will take a decision to raise the interest rate by 2% once more, and to issue a high-yield certificate of up to 20%, with the aim of curbing inflation, which the International Monetary Fund has always called for the need for interest in Egypt to be in line with its rates. , whether up or down.
They explained that the central bank’s interest rate hike would contribute to the entry of global funds to invest in government debt instruments (represented in treasury bills and bonds), supported by the fund’s approval to finance a new program to reform the Egyptian economy, in a compulsory return to what was known as “hot money,” despite what it caused. Damage to the Egyptian economy and the local currency.
In a related manner, a number of members of The Egyptian Parliament A sharp attack on the government, on Tuesday, due to the continuous decline in the value of pound once morest the dollar, and hundreds of factories stopped working in the various governorates, in a session dedicated to discussing briefing requests and questions addressed to the Minister of Trade and Industry, former MP Ahmed Samir.
