Markets and major banks respond after Egypt floats pound and raises interest rates

Ahram Online , Wednesday 6 Mar 2024

The Central Bank of Egypt (CBE) decided on Tuesday to float the Egyptian pound (EGP) and raise interest rates by six percent, in a bold move to meet economic challenges.

Egyptian pound banknotes sit on a table on March 6, 2024. Photo: AFP


- Egypt's two largest state-owned banks, National Bank of Egypt (NBE) and Banque Misr (BM), have announced new three-year certificates of deposit (CDs) with decreasing interest rates.

  • NBE's new CD offers an initial annual return of 30 percent, decreasing to 25 percent in the second year and 20 percent in the third year.
  • BM offers a similar product with a starting rate of 27 percent, dropping to 23 percent and 19 percent in subsequent years.
  • Both banks also introduced versions with quarterly and monthly payouts, with similar decreasing interest rate structures.

- The Egyptian Exchange (EGX) indexes hit a record high during Wednesday's trading, pushed by large purchases and the CBE decision to raise interest rates.

The market capital gained nearly EGP 79 billion, registering EGP 2.158 trillion.

The EGX 30 benchmark index, which tracks the performance of the 30 most liquid stocks traded on the Egyptian Exchange, jumped up 4.16 percent, recording 31,945.89 points.

The broader EGX 70 EWI of the leading small and medium enterprises (SMEs) increased 0.66 percent, hitting 7,504.86 points.

The all-embracing EGX 100 index was also up by one percent, closing at 10,640.1 points.

- The Central Bank of Egypt will hold a press conference this evening, at 6:30 PM Cairo time.

- The Egyptian pound was trading by EGP 50.1 to the dollar and EGP 54.5 to the euro.

Egyptian banks reflected the new exchange rates:

Banque Misr: USD: Buying - EGP 50, Selling - EGP 51; EUR: Buying - EGP 54.2, Selling - EGP 54.5

Commercial International Bank (CIB): USD: Buying - EGP 50.3, Selling - EGP 50.4; EUR: Buying - EGP 54.5, Selling - EGP 54.7

- Egypt and the International Monetary Fund (IMF) are expected to finalize a multi-billion dollar loan agreement within the next few hours, said a senior source close to talks.

The deal signals the culmination of months-long negotiations to secure additional financing for Egypt's economic development.

- The Central Bank of Egypt (CBE) has instructed local banks to lift the spending limit on foreign currency credit cards. The decision is part of a broader economic reform programme implemented by the CBE and the government, with the backing of international partners.

The move follows a period of restrictions implemented by the CBE throughout the past year to combat the misuse of credit cards for cash withdrawals abroad. 

- Based on the average exchange rates provided by major banks in Egypt, the US dollar exchange rate rose to EGP 46, compared to EGP 32 on Tuesday.

In the National Bank of Egypt (NBE), the dollar rate registered EGP 46.1 for buying and EGP 46.1 for selling; the euro rate recorded EGP 49.8 for buying and EGP 50.1 for selling.

In Banque Misr, the dollar rate stood at EGP 47 for buying and EGP 47.1 for selling; the euro rate reached EGP 50.9 for buying and EGP 51.2 for selling.

In the Commercial International Bank (CIB), the dollar rate recorded EGP 48 for buying and EGP 48.1 for selling; the euro rate recorded EGP 52 for buying and EGP 52.2 for selling.

- The CBE decided to accelerate the monetary tightening process to fast-track the disinflation path and ensure a decline in underlying inflation.

The bank said the step could result in a short-term contraction in the private sector’s real credit growth, but the persistence of excessive inflationary pressures poses greater risks to its stability.  

The price stability, the CBE added, fosters an environment conducive to sustainable private sector growth over the medium term.

Accordingly, the CBE’s overnight deposit rate, the overnight lending rate, and the rate of the main operation were raised by 600 basis points to 27.25 percent, 28.25 percent, and 27.75 percent, respectively.

- At an unscheduled meeting, the CBE decided to allow market forces to determine the value of the Egyptian pound.

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