Egyptian Central
The real interest on Egyptian treasury bills remains negative at 6.4%
Cairo – Khaled Hosni
Posted on: August 01, 2023: 01:22 PM GST Last updated: August 01, 2023: 02:13 PM GST
A recent report suggested that the Monetary Policy Committee of the Central Bank of Egypt will keep the current interest rates unchanged at its meeting scheduled for next Thursday.
At the moment, the overnight deposit and lending rate is currently 18.25% and 19.25% respectively. While the rate of credit and discount and the main operation of the central bank is 18.75%. The Central Bank of Egypt raised interest rates by a total of 1,000 basis points since March 2022, but kept them unchanged in the May and June meetings of this year.
The research department of the “HC” Securities and Investment Company indicated that inflation escalated for the second month in a row, recording 35.7% on an annual basis in June, up from 32.8% in May on an annual basis, as monthly prices increased by 2.08% on a monthly basis in June compared to June. By 2.72% in the previous month.
In terms of the global economy, the US Federal Reserve raised the interest rate by 25 basis points last Wednesday, to reach the range of 5.25-5.50%, i.e. a total increase of 100 basis points since the beginning of the year to date, and 425 basis points in 2022.
Inflation is at high levels
HC macroeconomic analyst, Heba Mounir, suggested that inflation in Egypt would continue to rise by 2.0% on a monthly basis, to record 36.6% on an annual basis for the month of July 2023, in conjunction with a shortage of some commodities and inputs as a result of tightening import operations and poor availability of hard currency. .
She pointed out that the import control, in conjunction with the improvement in tourism revenues, prompted a surplus in the net balance of payments in Egypt during the first and second quarters of the fiscal year 2022/2023, amounting to $523 million and $75.6 million, respectively, but it turned into a deficit of $1. $317 million in the third quarter of the same year due to a decline in exports by about 17% on a quarterly basis, affected by the drop in the prices of natural gas and petroleum products, as well as the decrease in the net surplus of the services balance by 46% compared to the previous quarter.
She pointed out that the Egyptian Council of Ministers announced the sale of assets worth $1.65 billion in July, and the New Urban Communities Authority sold land to foreigners at a value of $2 billion in the first half of 2023. Also, the net foreign exchange reserves increased by 4.29% on an annual basis and 0. 42% on a monthly basis to reach $34.8 billion in June. Deposits not included in official reserves increased by 19% on a monthly basis and 4.96 times on an annual basis to $4.37 billion for the same month.
As a result, Egypt’s one-year CDS value index declined to 867 from 1,221 points in the previous month. However, the lack of foreign currency supply led to a widening of the net liabilities gap of the banking sector in foreign currency by 1.2% on a monthly basis and almost 48% on an annual basis, to reach $24.4 billion in May 2023.
The two largest banks in the public sector, Banque Misr and the National Bank, also issued two types of certificates of deposit in dollars for a period of 3 years, with an annual interest of 7% and another of 9%, with a cumulative return in pounds paid in advance, in an attempt to improve the supply of foreign currency.
Accelerate the implementation of the offering program
Mounir said that if the pace of the government offering program is accelerated or the partial sale of assets by the Egyptian government, in addition to the success of dollar certificates in attracting depositors, this is supposed to lead to easing the pressure of the lack of foreign currency inflows.
At the same time, interest rates on treasury bills for a period of 12 months increased by 5.19 percentage points since the beginning of the year until now to 24.095%, which reflects a negative interest rate of 6.41%, according to HC estimates, which was evident from the registration of investor portfolios. Foreigners have a net exit of $3.43 billion during the nine months of the fiscal year 2022/2023.
She explained that, according to the current data, the increase in interest rates may not significantly revive investment portfolio flows, which may be contingent on the improvement of dollar liquidity, whose decline causes an increase in inflation rates, which also prompted a widening of the estimated inflationary gap between Egypt and the United States of America to 32.0. % during the third quarter of this year from its level at 29.2% in the second quarter.
The current aggressive monetary policy has also led to an acceleration of interest rates on short-term treasury bills compared to interest rates on longer-term instruments. Accordingly, the Monetary Policy Committee is likely to keep the current interest rates unchanged at its meeting scheduled for August 3.
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2023-08-01 09:22:00
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