After yesterday’s decisions by the Central Bank of Egypt and its moves to control the trend of the foreign exchange market, experts, analysts and investment banks have suggested that the market will tend to stabilize in the coming period, especially after the affiliated banks the government issued investment certificates with a high annual yield of 25%, as well as narrowing the gap between dollar exchange rates between the official and black markets.
The banks had already launched similar savings certificates last March, coinciding with the approval by the Central Bank of Egypt of the first significant increase in the dollar’s exchange rate during its extraordinary general meeting held in March last year.
Read more: How did dollar speculation turn into heavy losses in Egypt?
These certificates, which have been available to customers for about two months, have been able to attract deposits worth 750 billion pounds, on which the Central Bank of Egypt and the banks are betting in the issuance of the latest certificates.
It was not immediately clear whether Wednesday’s drop represented the expected transition to the floating exchange rate regime, said Mohamed Abu Basha, senior macro analyst at EFG-Hermes.
Abu Basha added, according to a report published by the “Financial Times” and viewed by Al Arabiya.net: “To judge this, we need to monitor the level at which the currency will eventually stabilize, and to what extent this will improve the liquidity of the foreign currencies in the banks and whether we see more volatility in the pound in the future”.
Abu Basha said he would “wait and see” the level of foreign currency liquidity in the interbank market, according to Bloomberg.
“There is a lot of confusion now about whether we have a really flexible exchange rate regime,” said Farouk Sousse, an economist at Goldman Sachs Group in London. He added: “It has not been tested whether the pound will be more resilient to external shocks in the future and whether it will act as an automatic stabilizing factor for external accounts.”
Read more: Banque Misr and Al-Ahly Bank issue new savings bonds, with 25% interest rate
He added: “Whether this will lead to a solution to the foreign currency liquidity problems facing Egypt will depend on whether we see large inflows of foreign currencies in the near term. The solution is to unify exchange rates, which will require the completion of all requests for foreign exchange.” accumulated and unmet demand and ensure that future foreign exchange demand is met,” according to Reuters.
Commenting on the recent decision to raise the dollar’s exchange rate against the Egyptian pound, Monica Malik, senior analyst at Abu Dhabi Islamic Bank, told Bloomberg that it was a fresh cut and not a full quote of the Egyptian pound against the dollar, adding: “It comes from the large difference between the official market price” and parallel, which has increased the scarcity and lack of foreign exchange liquidity.
In conjunction with these steps; The Central Bank of Egypt continues to release goods accumulated in Egyptian ports, especially after the end of the documentary credit mechanism from the beginning of this year. The value of imports that have flown out of Egyptian ports since early last December has risen to $6.8 billion, from $6 billion earlier this week, according to a recent statement by the Egyptian government. However, the statement did not disclose the value of the outstanding assets, while the government estimated it last week at around $9.5 billion on Dec. 25.
In his commentary, the economist, Hani Genena, predicted dollar cash flows over the next 3 weeks, noting that the fair price of the dollar varies between £26 and £28. In his statements yesterday, he said that the timing of issuing a savings bond with an annual yield of about 25%, and therefore the movement of the dollar exchange rate, is a good step in the framework of the savings moves of the dollar in the official market.
