©Reuters
Investing.com – The Egyptian pound appears to have not yet reached a fair price, according to flexible pricing mechanisms that the Central Bank of Egypt announced it was implementing on Oct. 26, coinciding with its decision to liberalize prices for the second time in one year.
In light of the continued decline in the pound, whose losses have come close to 26% since the second quotation decision at the end of October, while it has widened to 56% since the first liberalization decision of 20 March, it seems that the Central Bank of Egypt is about to make new interventions to control the markets.
A few hours after the meeting between the Governor of the Central Bank of Egypt and the Prime Minister, it seems that the Central Bank of Egypt met yesterday evening, Sunday, with the heads of 37 Egyptian banks, with the aim of studying further measures monitor market conditions and provide dollar liquidity.
This occurs a few days after the Central Bank’s announcement that it will stop supporting the support costs of 5 subsidized fruit-bearing initiatives for various economic sectors, which will be replaced by the Ministries of Finance, Housing, Services and Urban Communities, and Tourism and Antiquities Support Fund.
Interestingly, on the morning of December 26, the Central Bank of Egypt suddenly decided to liberalize exchange rates and raise interest rates by 200 basis points to deal with inflation, which has reached its highest level in 4 years.
pound now
From the beginning of the week until today’s trading, exchange rates have seen the Egyptian pound depreciate by two piasters against the dollar.
During these trading moments today, Monday, the dollar’s exchange rate soared to £24.6167 selling levels and £24.5367 buying levels, according to the Central Bank of Egypt’s price screen.
The dollar rate at national banks, Al-Ahly and Banque Misr, recorded levels of £24.55 in sells, and levels of £24.5 in buys, at these points in Monday’s trading.
In private banks, the price of the dollar recorded a rise of two points, to reach levels of 24.6 pounds for sales and levels of 24.57 dollars for purchases, in the banks of the Egyptian Gulf Bank, Abu Dhabi Islamic Bank, Commercial International Bank, Al Ahli Bank of Kuwait (Piraeus).
Important meeting
Yesterday, Sunday, Dr Mostafa Madbouly, prime minister, met with the governor of the central bank. He will follow up on a series of dossiers, under coordination between the government and the central bank, to make commodities available and ensure that sufficient stocks are available at safe levels.
Ambassador Nader Saad, official spokesman for the Prime Minister’s Office, said that during the meeting emphasis was placed on continuing coordination between the government and the central bank regarding the provision of the dollar resources needed to the supply of basic necessities and the production needs required for the industrial sector.
He added that the meeting also saw indications that the issue of increasing foreign exchange reserves occupies a top priority for both the government and the central bank.
In this context, work is underway during the current period by stepping up joint efforts to develop dollar resources by attracting more foreign direct investment, as well as boosting the tourism sector, as well as the initiative regarding cars for Egyptians working abroad and others.
attraction of the dollar
The Bloomberg agency said the governor of Egypt’s central bank met with heads of banks operating in the country to develop a plan to attract and liquidate the country’s hard currency, in order to help strengthen the dollar’s liquidity.
The plan envisaged how to compel tourist and hotel establishments to deposit their foreign currency earnings with local banks in exchange for obtaining financing services and incentives, as well as studying the issuance of savings packages in dollars for workers overseas and show more flexibility in examining the source of foreign exchange when depositing.
Price in pounds
According to reports, the focus was on studying the controls for pricing the Egyptian pound and its link to a basket of currencies, as well as opening a dialogue on dollar derivatives and emphasizing the top priority to the supply of hard currency for production needs.
In addition, bank branch managers in Egypt were instructed to show flexibility with customers regarding the movement of dollar deposits and not to be harsh towards them, as well as to establish a new definition for small and medium-sized enterprises that benefit of the 5% low interest rate financing initiative.
During the meeting with the heads of the banks, the Central Bank of Egypt gave the banks a new period of one year, ending in December 2023, so that their budgets comply with its previous instructions to reach the loan book of the small and medium enterprises to 25% of the total loan portfolio.
A crisis looms
According to the Bloomberg agency, the hard currency crisis in Egypt has resurfaced in the past two weeks, after some banks stopped opening new letters of credit or collection documents for importers, due to the scarcity of the dollar.
Last October, the Central Bank of Egypt progressively canceled the instructions for the use of documentary credits in import financing operations, until the complete cancellation in December, and the return to the old system through collection deeds.
According to the agency, the import process has been completely halted for two weeks, as there is no hard currency, and the banks are content to verbally agree, but do not implement, to return and state that they are proceeding according to priorities, parallel to the strong increase in the price of the dollar in the parallel market.
pounds last week
Sterling against the dollar, according to data from the Central Bank of Egypt, at the end of trading on Thursday, recorded levels of 24.5204 pounds dollars in buys, and levels of 24.5975 pounds dollars in sales.
In national banks, the National Bank and Banque Misr, the dollar’s rate recorded levels of £24.48 in buys, and levels of £24.53 in sales, according to last Thursday’s transactions.
In private banks, the dollar’s exchange rate against the pound rose at the close of trading on Thursday, to levels of $24.53 for buys, and levels of $24.59 for sells.
