2023-08-17 10:59:17
interest rates
If Egypt wants to move forward with the policy of gradually containing inflation through monetary policy tools and in switching to a flexible exchange system for foreign currencies, a new hike in interest rates will be justified, after the Central Bank of Egypt raised it by 11 percentage points (1100 basis points) over the course of the 17 months. past, says S&P. In this context, the agency expects an increase of 100 basis points at the bank’s meeting in September, and the same at the November meeting, bringing the basic interest rate to 21.25%, in conjunction with a likely new adjustment in the local currency exchange rate, at the same time that the review of the International Monetary Fund ends. Egypt’s program of economic reforms.
At a value of 626.4 million… Egypt sells treasury bills in euros, with a return of 4%
This is the basic scenario that S&P is likely to see if there is a significant improvement in net central bank reserves, supported by a strong tourism season and further progress in the government’s issuance program (which raised $1.65 billion in foreign currency from offerings in early July). The stated goal is to raise an additional $1 billion.
On the negative side of the currency and inflation outlook, the agency said the authorities could artificially keep the exchange rate steady until the end of 2023. This could happen if progress in asset sales (other than debt flows) does not match the authorities’ expectations of maintaining the managed exchange rate regime. In this case, the currency will be stronger than expectations assume, which will reduce inflationary pressures, and allow the central bank to delay raising interest rates until late 2023, or it may keep interest rates unchanged for the rest of 2023.
The expectations have another side, according to S&P, as the weakness of the Egyptian currency could be more severe than expected, especially if the central bank floated the pound completely. In such a scenario, the pound exchange rate is likely to exceed the level of 37 pounds per dollar, exceeding expectations for the end of 2023, which will lead to stronger inflationary pressures, with which the Central Bank will be forced to raise interest rates by 300 basis points, as it did in December 2022.
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