Several actions taken in tandem with state agencies and economic working groups, as well as the agreements CBE inked with international economic and financial organisations, demonstrate the impact it has on price reduction, market stability, and inflation control.

Establishing itself in January 1961, the Central Bank of Egypt (CBE) replaced the National Bank of Egypt in note issuance and central banking operations. Assuming the authority and powers granted by Law No. 88 for 2003 and Presidential Decree No. 64 for 2004, which issued the Central Bank Statute, the CBE is an independent public legal entity.

We may list a few of the most significant ones in this regard, beginning with the liberalisation of exchange rates on March 7. Since the decision was made, CBE has been monitoring the foreign exchange market to make sure there are enough balances available in the interbank market and to pay for and settle all outstanding documentary credits that need to be collected at official prices.

As a result, outstanding requests for foreign exchange have vanished, enabling the ultimate discharge of production needs, raw materials, and strategic commodities that had been held up at Egyptian ports.

Naturally, this action dealt a triple blow, expelling the leading demand components from the parallel market and precipitating a decline in the USD rate. However, products eventually became available, and their costs decreased quite gradually.

However, to address high inflation and contain it so that it gradually approaches its targets, CBE adopted a very restrictive interim monetary policy regarding the interest rate, raising it by 800 basis points during the first quarter of 2024 in tandem with the announcement of liberalising the exchange rate.

In this manner, it was able to lower prices and regulate the rate of inflation. At low rates of return, CBE then proceeded to devote 25% of the financing portfolio of the banking system to small and medium-sized financing activities. As a result, both the availability and pricing of those industries’ products in the marketplace decreased.

The World Bank has disclosed that it will provide the Egyptian government with USD 700 million in Development Policy Financing (DPF) as part of the USD 6 billion overall support programme that the global financial institution announced in March 2024. This USD 700 million grant is the first step of a three-phase initiative that will get financial support over three years.

This DPF, which goes by the name “Generating Resilience, Opportunities, and Welfare for a Thriving Egypt,” aims to solve Egypt’s immediate economic problems while simultaneously setting the groundwork for long-term structural reforms to the political system.

The aforementioned changes aim to enhance the involvement of the private sector, strengthen macroeconomic and fiscal resilience, and support Egypt’s green transition by augmenting renewable energy production and elevating efficiency in the energy, water, and sanitation domains.

The overall goal of the USD 6 billion World Bank financial support programme is to promote sustainable climate resilience, improve economic management in the nation, and increase employment in the private sector.

We also understand how CBE authorises state-owned banking system units to issue extraordinary rate of return savings certificates to both compensate household savers for the high rate of inflation and enable those banks to absorb liquidity and lower demand to control inflation.

Additionally, CBE works with the Ministry of Finance to execute its new financing strategy for agricultural and industrial activities through the banking system’s units. Due to the growth in volume and financing options for this kind of business, this significantly lowers the cost of goods for residents.

To control the money supply and remove excess liquidity from the banking system units, the CBE keeps interfering in open market mechanisms. Additionally, it has adjusted the weekly deposit mechanism.

The goal of all of this is to control the money supply and the rate of inflation by ensuring price stability, accurate control over the liquidity rate, and the quantity of payments made in the market.

Concurrently, CBE keeps enacting measures to encourage investment, boost economic expansion, and create jobs. Alongside these goals, it is working with international financial institutions to successfully finish and implement economic and structural reform initiatives that have the potential to boost overall economic activity, reduce commodity prices, and improve production.

The post IF Insights: Central Bank of Egypt’s prudent monetary policies lead to stability & growth appeared first on International Finance.

The inflation rise preceded the recent currency depreciation. After a year of stability at 30.85, the central bank allowed the Egyptian pound to plunge to 50 to the dollar.

The consensus February inflation forecast by 14 analysts was 25.1%. Egypt’s inflation rate fell from September 2023’s record 38.0% before February 2024.

Prices jumped 11.4% in February, up from 1.6% in January. Food costs rose 15.9% from 1.4% in January.

Despite the advantageous base year contribution of -5.5%, Allen Sandeep of Naeem Brokerage said that Egypt’s annual reading rose sharply due to a surge in monthly inflation of both food (F&B) and non-food items.

Recently, Egypt’s Finance Minister Mohamed Maait informed about the Northeast African nation signing a support package with the IMF to reduce its budget deficit. Egypt’s main budget surplus would exceed 3.5% in the July fiscal year, he told in a press conference.

The primary surplus excludes interest payments, which accounted for over half of the expenditures in the seven months to the end of January and left Egypt in deficit.

In February 2024, the finance ministry predicted a 2.5% primary general budget surplus for fiscal 2023–24.

Egypt signed an IMF-led agreement to sell Ras al-Hikma development rights to Abu Dhabi for USD 24 billion. Maait stated that the World Bank provided USD 3 billion.

“The nice element is the Ras al-Hikma contract, a not-small percentage of which will enter the general budget in pounds,” Mohamed Maait told reporters. Ras al-Hikma ensures a lower deficit than planned.

Suez Canal and other revenue dropped, but expenditure rose due to a falling currency and rising interest rates on Egypt’s obligations, according to Maait.

As per the analysts, the Egyptian Central Bank’s move to liberalise the exchange rate of the local currency against the US dollar, along with the rise in interest rates by 6% is expected to have both positive and negative effects on the Northeast African country’s economy.

An immediate positive result here will be the anticipated dollar flows into the Egyptian market, with experts pointing to the importance of good management to achieve the utmost benefit for the overall economy. However, on the other hand, Egypt may continue reeling under the burden of the high inflation rate caused by the currency devaluation.

“The demand for the dollar is expected to continue until the release of goods seized at Egyptian customs and ports, which some estimated at about USD 8 billion,” stated media outlet Asharq Al-Awsat.

The post Egypt’s inflation rises to 35.7% as country awaits dollar inflows appeared first on International Finance.

The rating reflects the losses incurred due to Lebanon’s ongoing default since March 16, 2020, according to Moody’s.

Its frail institutions seem unable to confront the nation’s deepening economic, financial, and social crises.

Due to the high probability of large losses for private creditors, the agency also modified the country’s outlook from no outlook to stable, reflecting its expectation that the “C” rating will stay in place for the foreseeable future.

The agency also anticipates a volatile economic environment to endure, because of persistent political impasse and weak institutions.

A spike in inflation that reached a startling 215.4% by the end of October 2023 compared to the same period the previous year, coupled with the collapse of the national currency in the parallel market, contributed to the economic distress.

The lack of significant steps toward realistic fiscal and economic policy reforms casts doubt on the viability of official external funding support to go along with a government debt restructuring in the near future.

A deepening Israel-Hamas conflict has the potential to reverse recent gains in the tourism industry and further undermine economic activity in Lebanon, a country beset by political impasse and weak institutions.

While the foreign currency ceiling stays at the same level, the agency also discovered that the local currency ceiling is still at “Ca,” indicating that its obligation is almost in default.

Lebanon’s ESG Credit Impact Score revealed a significantly lower rating than it would have otherwise gotten when taking governance, social, and environmental factors into account.

Reduced ability to withstand social and environmental risks is a result of governance limitations, falling wealth, and an overburdened government balance sheet.

The nation has long-standing problems with solid waste disposal and over 25% of the population has access to contaminated drinking water. In addition, there are water shortages that are expected to worsen if appropriate policies are not put in place.

The post Moody’s maintained its ‘C’ rating on Egypt appeared first on International Finance.

Gamea noted that the increased growth happened due to an increase in exports to 23 European countries, including countries like Italy, Spain, Germany and the Netherlands. The Egyptian ministry also mentioned that the Egyptian exports to Italy hiked by 51.6 percent, Spain by 77.5 percent, Germany by 22 percent, and the Netherlands by 30.7 percent.

Gamea mentioned that the rise in exports also happened because of the ministry’s efforts with all its affiliated agencies, including the Egyptian Commercial Offices in these countries. She also added that the ministry is also keen on enhancing trade cooperation with the European Union since Egypt has close economic relations with various countries of the Union.

Ahmed Maghawry, head of the Egyptian Commercial Services said that among all the exports, Egypt exported iron and steel exports worth $608.19 million, aluminium and organic chemicals worth $139.66 million. Additionally, exports of plastic products, fertilizers, aluminium, iron and steel, and organic chemicals also saw a record increase during the same period.

Some media reports also indicated that Egypt plans to increase its date exports to $100 million over the coming four years, according to a statement released by the Deputy Executive Director of the Egyptian Food Export Council, Tameem El-Dawy.

The post Egypt’s non-oil export to the EU increases by 38% in eight months appeared first on International Finance.

The loan will also allocate funds to SMEs operating in sectors like industry, commerce, and agriculture, which is expected to improve the use of energy, water, and land resources, along with investments in high-performing technologies, which, in turn, will boost Egypt’s economy. The Green Economy Financing Facility (GEFF) Technology Selector with also help to identify the typical green technologies available in Egypt

This marks the third loan provided to NBE by EBRD GEFF, and they will also benefit from the well-rounded technical corporation programme. As the largest commercial bank in Egypt, NBE began its alliance with EBRD in 2013. Apart from supporting the green projects, the alliance also includes credit and trade finance lines, supporting women entrepreneurs and youth-led businesses, and strengthening the country’s energy efficiency.

Egypt is also one of the founding members of EBRD and since the inception of its operations, the bank has invested more than €7.3 billion throughout 130 projects in the country. Last year, EBRD invested more than €1 billion in the Egyptian market and started a programme where they work with international financial institutions to provide the liquidity needed for the local banks, which will help them expand their financing to the private sector, including SMEs, which will support them financially during the crisis.

The bank allocated $800 million under this programme to the Egyptian banks for lending to SMEs, in an effort to help them navigate through the financial crisis brought on by the Covid-19 pandemic.

The post Egypt’s NBE receives $100 mn from EBRD to support SMEs appeared first on International Finance.