Egypt’s Central Bank withdraws Liquidity Worth EGP 964.4 Billion in Open Market tender
In a significant move to manage liquidity, the Central Bank of Egypt recently withdrew EGP 964.4 billion through an open market tender. This operation, conducted on Tuesday, saw all applications submitted by 27 banks accepted at an interest rate of 27.75%. This follows last week’s withdrawal of EGP 680.3 billion, where requests from 30 banks were approved.
The Central Bank has been actively adjusting its strategies to manage surplus liquidity in the banking sector. In April 2024, it introduced new rules for the Main Operation, a process linking deposits in open market operations. Previously,bids were accepted using the allocation method,which steadfast the share based on the ratio of a bank’s bid to the total bids. Though, starting April 23, 2024, the bank shifted to accepting all submitted bids, aligning with international best practices.
This decision reflects the Central Bank’s commitment to enhancing the effectiveness of its monetary policy decisions. “In light of its keenness to follow the best international practices with regard to managing surplus liquidity in the banking sector and improving the impact of monetary policy decisions,it was decided to change the method of accepting bids,” the bank stated.
Surge in Local Liquidity
The Egyptian banking system has witnessed a remarkable increase in local liquidity over the past year. Data from the Central Bank shows that domestic liquidity rose by EGP 2.464 trillion during the first 11 months of 2024, reaching EGP 11.341 trillion by the end of November. This marks a significant jump from EGP 8.877 trillion recorded in December 2023.
Here’s a breakdown of the monthly liquidity levels in 2024:
| Month | Liquidity (EGP Trillion) |
|——————|—————————–|
| January 2024 | 8.983 |
| Febuary 2024 | 9.124 |
| March 2024 | 9.988 |
| April 2024 | 10.097 |
| May 2024 | 10.348 |
| June 2024 | 10.618 |
| July 2024 | 10.783 |
| August 2024 | 10.895 |
| September 2024 | 11.081 |
| October 2024 | 11.247 |
| November 2024 | 11.341 |
The steady rise in liquidity highlights the robustness of Egypt’s banking sector, even as the Central Bank continues to implement measures to manage excess funds effectively.
Looking Ahead
The Central Bank’s proactive approach to liquidity management underscores its role in maintaining financial stability. By adopting international best practices and ensuring clarity through the publication of results on its website, the bank is fostering confidence in Egypt’s monetary policy framework.
For more insights into the Egyptian banking system, visit the Central Bank of Egypt’s official website.
As the banking sector continues to evolve, stakeholders will be closely monitoring the impact of these measures on the broader economy. The Central bank’s efforts to balance liquidity and stability are set to play a pivotal role in shaping Egypt’s financial landscape in the coming years.
Headline:
“Egypt’s central Bank: Navigating Liquidity Surplus and Monetary Policy with Dr. Amal El-Said”
Introduction:
Join Senior editor, Alex Johnson, as he sits down with renowned economist and financial specialist, Dr. Amal El-Said, to discuss the recent liquidity withdrawals and evolving strategies of Egypt’s Central bank. With the Egyptian banking system witnessing a important surge in local liquidity, Dr. El-said’s insights offer a deeper understanding of the Central Bank’s role in maintaining financial stability and the impact of its measures on the broader economy.
1. Recent Liquidity Withdrawals: A Step Towards Liquidity Management
Alex Johnson (AJ): Dr. El-Said, in the past few weeks, Egypt’s Central Bank has withdrawal significant amounts of liquidity – EGP 680.3 billion and EGP 964.4 billion – from the market. Can you tell us more about these operations and their significance?
Dr. Amal El-Said (AE): Certainly, Alex. These open market operations, or OMOs, are part of the Central Bank’s ongoing efforts to manage surplus liquidity in the banking sector. By withdrawing these amounts, the Central Bank aims to absorb some of the excess funds, helping to maintain a balanced financial environment. The central bank accepted all applications from participating banks, indicating a broad-based involvement in these liquidity management efforts.
2. Shifts in Main Operation Rules: A Move Towards International best Practices
AJ: In April of this year, the Central Bank introduced new rules for the Main Operation, shifting from the allocation method to accepting all submitted bids. How does this change impact liquidity management and monetary policy?
AE: this shift in methodology demonstrates the Central Bank’s commitment to adhering to international best practices. Previously, bids were accepted based on a bank’s share in the total bids, which could lead to some banks not having their full requests fulfilled. By accepting all submitted bids, the Central Bank ensures that all eligible banks can participate fully in liquidity management, enhancing the effectiveness of monetary policy decisions. This new approach also aligns with the Central Bank’s transparency efforts, as it publishes the results of these operations on its official website.
3. Surge in Local Liquidity: A Robust Banking Sector and the need for Effective Liquidity Management
AJ: Recent data shows a remarkable increase in local liquidity, with domestic liquidity rising by EGP 2.464 trillion over the past 11 months.How does this surge impact the banking sector and the broader economy?
AE: The surge in local liquidity reflects the robustness and growth of egypt’s banking sector, which is a positive indicator for the economy. However, managing this excess liquidity effectively is crucial to prevent potential financial imbalances. The Central Bank’s proactive liquidity management strategies help maintain financial stability by balancing liquidity levels and mitigating risks associated with excessive funds in the system.
4. Looking Ahead: Confidence in Monetary Policy Framework and Evolving Banking Sector
AJ: As we look to the future, what role will the Central Bank’s efforts play in shaping Egypt’s financial landscape, and how can stakeholders monitor the impact of these measures?
AE: The Central Bank’s ongoing efforts to balance liquidity and stability will be pivotal in shaping Egypt’s financial landscape in the coming years. Stakeholders,including businesses,investors,and the general public,can stay informed by closely monitoring the Central Bank’s actions,reviewing its published data,and keeping an eye on key economic indicators. Maintaining confidence in the Central Bank’s monetary policy framework will be crucial as the banking sector continues to evolve, and effective communication of its measures will foster this confidence among all stakeholders.
