The Egyptian pound declined significantly against the dollar (Al Jazeera)

Cairo

- The exchange rate of the US dollar jumped 62.40% against the Egyptian pound, at the time of writing the report, to the level of 50.1 pounds, up from 30.85 pounds at the beginning of Wednesday’s trading.

  • The exchange rate of the dollar reached 50.1 pounds at the Arab International Bank.

  • And 49.7 pounds in the United Bank.

  • And 49.65 pounds at Al Baraka Bank.

  • And 49.60 pounds at the Arab Banking Company Bank.

Parallel market transactions stopped amid anticipation of what will result from today's developments in the official price, according to what a market trader told Al Jazeera Net.

The market was expecting a movement in the exchange rate during the last period, with the gap between the exchange rate of the green note in the parallel market and the official exchange rate increasing to more than double, amid a decline in Egypt’s dollar resources.

Benefit

The Central Bank of Egypt raised interest rates by 600 basis points in an extraordinary meeting, saying that it would allow the exchange rate to be determined “according to market mechanisms,” and that it would continue its efforts to shift towards a flexible framework for targeting inflation.

Thus, the interest on overnight lending increased to 28.25% and on overnight deposits to 27.25%, as part of his decision to accelerate the monetary restriction process in order to accelerate inflation’s arrival on its downward path.

The Central Bank affirmed its “commitment to maintaining price stability in the medium term, within the framework of its keenness to fulfill the role assigned to it in protecting the requirements of sustainable development, and to achieve this, the Central Bank is committed to continuing its efforts to shift towards a flexible framework by continuing to target inflation as the nominal basis of monetary policy while allowing the price The exchange rate should be determined according to market mechanisms.”

He added, "Unifying the exchange rate is a measure of great importance, as it contributes to eliminating the accumulation of demand for foreign exchange following the closing of the gap between the official and parallel market exchange rates."

While the central bank set inflation targeting, it was also seeking to manage the exchange rate of the pound, which remained stable at about 30.85 pounds against the dollar over the past year as part of the bank’s attempt to defend its value amid a chronic shortage of foreign currencies.

Banking expert Hani Adel says that the Central Bank's measures taken today would create a state of stability in the exchange rate of the Egyptian pound, provide the dollar for import, and release goods held in Egyptian ports as a result of the scarcity of foreign currency.

He explained to Al Jazeera Net that raising interest by 6% increases credit restrictions on companies in financing, but he ruled out that interest rates would continue at their levels for a long time.

In the medium and long term, Adel says that there is a need to reduce dollar spending in Egypt, which is directed abroad for import, by providing local alternatives to goods through work between the public and private sectors, noting that Egypt imports the majority of goods, even requirements for the production of manufactured goods. locally.

A banking source told Al Jazeera Net, who refused to mention his name because he was not authorized to speak to the media, that a number of banks have begun providing dollars to importers, and that the pending requests during the last period have been met.

Central Bank of Egypt (European)

IMF agreement

The Central Bank of Egypt has directed the opening of credit card limits in foreign currency, and is scheduled to hold a press conference this evening, Egyptian state television reported, while Cairo News Channel quoted a high-ranking source as saying that Egypt will sign an agreement with the International Monetary Fund within hours.

Tradeweb data showed that the country's international bonds rose, with longer-term bonds achieving the largest gains.

The premium demanded by investors over US Treasury bonds, which are considered a safe haven to hold Egypt’s international bonds, decreased to 534 basis points, which is its lowest level since June 2021, according to JPMorgan data.

In late February, the government signed a major investment deal with the UAE that eased pressure on the Egyptian pound in the parallel market, bringing the dollar to around 40 pounds, compared to more than 60 pounds before that, according to observers.

The National Bank of Egypt and Banque Misr - the two largest government banks in Egypt - offered 3-year certificates with a decreasing interest rate of 30% for the first year, 25% for the second year, and 20% for the third.

This procedure is inherent in flotation operations in order to withdraw liquidity from the markets and invest in the Egyptian pound instead of “dollarization,” and to reduce inflation rates resulting from lowering the currency exchange rate.

The head of wisdom

These accelerated measures come after the Egyptian Council of Ministers announced earlier this month that it had received the first installment of the investment partnership deal with the Emirates for the Ras El Hekma City Development Project, worth $10 billion.

Egyptian Prime Minister Mostafa Madbouly said that measures are being taken to transfer an additional $5 billion from the UAE deposit to the Central Bank, within the terms agreed upon in the deal.

Madbouly during the signing ceremony of the Ras El Hekma agreement (Source: Egyptian Cabinet via Facebook)

Madbouly explained that within two months, Egypt will receive the remaining amount that was announced, to complete the amount of $35 billion in direct investment entering the state from this deal, in addition to the 35% that it will receive from the project’s profits.

He added that Egypt also received a payment worth $520 million as part of the “hotel deal” recently signed by the Egyptian government.

Last December, the Egyptian government agreed to sell shares in 7 historic hotels in Cairo, Alexandria, Luxor, and Aswan to ICON, ADQ, and Abu Dhabi National Exhibitions Company for a value of $800 million.

Source: Al Jazeera + Reuters