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Investing.com – The price of Egyptian banks has now surpassed 31 pounds to the dollar, while the rest of Egyptian banks are moving higher in the meantime. On the forex screen, the dollar against the pound is registered at 31,500.
The pound is now posting levels of 32.1 against the dollar in Abu Dhabi Islamic Bank in the bank’s latest price screen update, and has also recorded levels of 31.9 pounds per dollar in HSBC Bank. In the National Bank it reached levels of 31.8 per dollar.
Thus, the Egyptian pound has lost more than 84% since March 2022, according to Refinitiv data.
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This comes after the release yesterday by the International Monetary Fund of a report on the financial situation in Egypt and the publication of directives for the economy, the most important of which was the central support for the flexibility of the Egyptian currency vis-à-vis foreign currencies without interference from the plant, except in cases of high volatility, as well as the claim that fuel prices will not be reduced before a full recovery Value of fuel subsidy. In addition to the fuel pricing mechanism, there will be a domestic gas pricing mechanism, which will reflect international prices.
In another context, some types of green tax are being studied which raise the effective price of carbon, thus limiting the reduction of emissions.
The bank revealed that it had stopped allocating dollars directly from its reserves to government agencies that had to go to the market so that the pound’s price would reflect the volume of demand for the currency.
The Finance Minister comments on the economic situation
Egypt’s Finance Minister, Mohamed Maait, denied the government’s intention to impose new taxes and affirmed Egypt’s commitment to the fiscal path that stimulates domestic and foreign investment, with the aim of advancing the economy sustainably, underlining that there are no intentions to impose new taxes on economic activities and no prejudice to the rate of commercial and industrial profits.
Maait Wazir said that a bill to end all old tax filings is currently being prepared, stressing that the state does not wish to start tax disputes with the business community.
Despite global economic hurdles, Moati Moati said Egypt aims during the 2023-2024 fiscal year to reduce its budget deficit to 5% levels over the medium term, with the aim of deleveraging to less than 80% of GDP by the end of 2027.
Projections down to 32
HSBC said the current round of currency devaluation is part of a long-awaited campaign to rebalance Egypt’s external accounts after last year’s external shocks.
In a recent research note, HSBC Bank raised its expectations for the price of the dollar against the pound, likely coming in at £32.50 on average in the near term, up from £26 in its previous expectations.
The report indicated that the continued decline of the pound in the near term is due to the increase in the dollar’s very high borrowing needs and relatively low capital inflows over this period.
HSBC Bank added that the decision to raise the interest rate came to address the decrease in the exchange rate, as the central bank decided to raise the interest rate by 3% last December.
The bank stressed that the Central Bank of Egypt kept the short-term inflation rate at 7% (+/- 2), aiming for it to fall to 5%, with a 2% increase or decrease during the quarter. quarter of 2026.
HSBC Bank said the central bank has started to move to a floating exchange rate, as stated in the International Monetary Fund’s statement, and this was demonstrated by funding documentary credits for the release of stacked goods at ports.
The Central Bank of Egypt announced the adoption of an exchange rate policy twice, first in March, and increased interest at that time by 200 basis points, and second time in October 2022, and raised the interest at that time by 300 basis points.
Egypt and the IMF
Last December, the IMF approved a $3 billion loan to Egypt under a 46-month programme, giving Egypt access to additional $1.3 billion in financing from the IMF mechanism. trustee for resilience and flexibility.
The disbursement of the fund loan in 9 six-monthly tranches is envisaged, for a value of 261 million units of special drawing rights, together with the payment by Egypt, in this period, of a large part of the shares due to the fund, so that the percentage of funding of the fund for its share at the end of the programming period will fall to 236%, compared to 662% at the beginning.
