2024-03-11 13:31:46
Consumer prices jump to 35.7% in February
The Egyptian economy is preparing for a number of futures, positive and negative at the same time, after the bold steps taken by the Central Bank to reduce the currency to a new record level of 50 pounds per dollar, and raise interest rates by 600 basis points.
The expected dollar flows to the Egyptian economy come at the top of the positive futures, which experts have called for good management in order to bear fruit on the overall economy, while the high inflation rate came as the most prominent negative futures that come to the economy as a result of the devaluation of the currency.
Egypt is expected to receive financing amounting to $3 billion from the World Bank, as part of a financing package from the International Monetary Fund for the country with an expected value of $20 billion. According to Egyptian Finance Minister Mohamed Maait.
Egypt and the International Monetary Fund had agreed to increase the value of the financing program to $8 billion from $3 billion, in addition to about $1 to $1.2 billion from the Fund’s sustainability program.
Given the expected volume of financing from Ras al-Hikma, amounting to $35 billion, in addition to about $20 billion in financing packages from the Fund, Egypt may then reach the point of closing its dollar gap, which some estimate at about $50 billion.
Last week, the Central Bank of Egypt announced that it would raise interest rates by 600 basis points and allow the exchange rate to move according to market mechanisms, bringing the dollar exchange rate to an average of 49.5 pounds in commercial banks after it had stabilized at 30.9 pounds for nearly a year.
Maait said that goods worth $13 billion have been released since the first of January until now.
It is expected that the demand for the dollar will continue until the goods seized at Egyptian customs and ports are released, from last week until now, which some estimate at about 8 billion dollars.
Meanwhile, the prices of goods and products did not respond immediately; Given that “the goods and products currently offered are at the price of the black market dollar when it was 70 pounds… before the recent float.” According to Shaaban Taha, a home appliances trader, he confirmed to Asharq Al-Awsat that once the stock (of goods) runs out, the new products will be priced at the new price.
However, Imad Qenawi, a member of the Board of Directors of the General Federation of Chambers of Commerce and head of the Importers Division, explained that “the producer and the merchant have a moral, social, and national responsibility… When the dollar was high, everyone valued his product in dollars as a hedge to preserve his capital, and when the dollar fell, he valued his product in Egyptian pounds as a hedge.” To preserve his capital.
Qenawi stressed in a press statement on Sunday that “the effects of the Central Bank’s decisions will be positive on the economy and on inflation rates, especially since the decisions contribute to the return of foreign currencies from the black market to their status in the banking system, and the absence of a parallel exchange rate will have positive effects on the Egyptian economy.” ».
Theses programme
While Egypt is preparing to exit some companies to leave more space for the private sector, a framework that has been emphasized by the International Monetary Fund, Maait confirmed that the government will proceed with its program to exit some assets within the implementation of the state ownership policy document in accordance with the agreement with the Fund, explaining that the public treasury The state will receive half of the proceeds of any investment proposals or deals, and there is a government discussion to apply this rule to the Ras al-Hikma deal with the UAE.
Maait said that the proposal program comes in implementation of state policy and aims to strengthen the role of the private sector. He added that Egypt does not plan to issue international bonds until the end of the current fiscal year, explaining that investors have returned to buying Egyptian treasury bills after the measures announced by the Central Bank last week.
Inflation
At a time when the Egyptian economy is awaiting positive indicators to push it towards sustainable growth, after the Ras al-Hikma deal, the forced flotation, and the agreement with the International Monetary Fund, inflation rates during the month of February were higher than expectations, as they jumped to 35.7 percent. To end a series of declines that began since last October, from 29.8 percent in January, driven mainly by the rise in food and beverage prices.
The increase in inflation comes ahead of an expected rise as a result of last week’s currency devaluation. While the inflation rate in Egypt was declining from a historical level of 38 percent in September.
Data from the Central Agency for Public Mobilization and Statistics on Sunday attributed the reasons for the increase to “an increase in the prices of the meat and poultry group by (25.0 percent), the cereals and bread group by (14.2 percent), the fish and seafood group by (11.5 percent), and the dairy, cheese and eggs group.” by (12.8%), and the oils and fats group by (14.1%)…”
A risk analyst at Nile Financial Leasing Company, Zaher Khalif, expected that “the inflation rate will continue to rise during the coming period, as a result of the devaluation of the pound.” He told Asharq Al-Awsat: “Inflation data in February came more than expected, driven by the increase in food and beverage prices, as a result of producers’ expectations of a devaluation of the Egyptian currency against the dollar after discussions and meetings with IMF officials…”
Regarding the dollar crisis and whether it was resolved after the Ras al-Hekma deal, Khalif said: “I do not think that the dollar crisis in Egypt can be solved simply by signing a deal like Ras al-Hekma, unless this money is properly exploited, and unless the state searches for radical solutions to this problem, especially after… The impact of geopolitical tensions on the Suez Canal, one of Egypt’s most important sources of hard currency.”
Regarding the radical solutions to the dollar crisis, he stressed that they must “include diversifying the sources of the dollar and localizing industries, especially since Egypt enjoys competitive advantages, including: geographical location, for example, the availability of skilled workers, and low labor costs…”, pointing to the importance of enhancing currency exchange. Local.
While the head of the Importers Division of the Cairo Chamber of Commerce affirmed, “We are now in a critical situation and a critical time, and everyone must support the state and abandon narrow personal interests… If we do not help and abandon narrow personal interests and benefits, we will be the first victims of economic failure.”
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