No more 15 per cent certificates

Tuesday 22 Sep 2020

No more 15 per cent certificates
No more 15 per cent certificates

THE STATE-owned National Bank of Egypt (NBE) and Banque Misr have decided to stop issuing their 15 per cent-yield savings certificates.

The certificates were introduced in March following the Central Bank of Egypt’s (CBE) decision to reduce inter-bank interest rates by three per cent to compensate depositors. The certificates, issued by the two state-owned banks, have attracted LE383 million in savings since March, with the NBE attracting LE280 million.

This was not the first time the banks had introduced high-yield certificates, as the CBE offered 20 per cent certificates soon after the devaluation of the Egyptian pound in 2016 to combat increasing dollarisation. Today’s move supports the possibility that the CBE will lower interest rates in its meeting today (Thursday), having opted to keep rates unchanged during the last four meetings of its Monetary Policy Committee.

Interest rates currently stand at 9.25 per cent on deposits and 10.25 per cent on loans. Lowering the rates has become a possible scenario as the inflation rate has been heading south for the last few months to reach 3.4 per cent in August, its lowest level in 10 months.

However, all 11 analysts polled by Enterprise, an online news outlet, ruled out the possibility that the CBE would lower interest rates. “Our expectation is that the Central Bank will keep interest rates steady despite the decline in inflation,” said Mona Bedeir, senior economist at Prime Holding.

“The Central Bank is assured of its ability to achieve its inflationary goals, and therefore its focus is on the stability of the exchange rate and the attractiveness of domestic debt instruments to compensate for the shortage of other foreign-exchange sources or transfers,” she said.

The decision to scrap the high-yield certificates was accompanied by the National Investment Bank’s decision to lower rates on all its savings certificates. Its popular B certificate, which used to yield 14 per cent, is now offered at a 10 per cent interest rate.


*A version of this article appears in print in the 24 September, 2020 edition of Al-Ahram Weekly

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