Saudi Al-Rajhi Bank suspends EGP transactions in kingdom

Doaa A.Moneim , Muhammed Khalid , Monday 22 Jan 2024

Saudi Islamic Al-Rajhi Bank, one of the biggest banks in the country, suspended transactions in Egyptian pounds across all of its branches in the kingdom, an informed source at the bank told Ahram Online.

Al-Rajhi Bank branch. Official website.
Al-Rajhi Bank branch. Official website.

 

“The decision originated from the instability of the exchange rate of the pound in the parallel market,” the source, who requested anonymity, explained.

He added that the decision is temporary and is contingent on the stabilization of the pound’s exchange rate.

A group of tourism company owners in Egypt confirmed that Al-Rajhi Bank informed them of the suspension.

“There are no stable rates for the pound in the market and the market is witnessing speculation as traders anticipate a devaluation,” banking expert Mohamed El-Beih told Ahram Online.

“A big economy like Saudi Arabia with a huge number of Egyptian expats and pilgrims is typically trading on huge amounts of the pounds regularly, which could urge banks there to take such precautions against the instability in the pound,” El-Beih added.

He noted that a visit to Egypt by a mission from the International Monetary Fund (IMF) to discuss a new deal has caused speculation on the pound in the parallel market.

The IMF delegation, led by Mission Chief for Egypt Ivanna Vladkova Hollar, arrived in Cairo earlier this month to discuss the first and second reviews of Egypt’s reform programme supported by the fund’s Extended Fund Facility (EFF).

IMF programme
 

In December 2022, the IMF approved a four-year $3 billion EFF loan programme for Egypt.

Since then, Egypt has not completed the programme’s first and second reviews, amid the ongoing challenges facing the country’s economy due to global and regional geopolitical tensions. This has delayed the disbursement of two more tranches of the loan that Egypt should have received in March and September 2023.  

Under the EFF, the country is committed to implementing flexible interest and exchange rate regimes, promoting private sector participation in the economy, and reducing debt and inflation levels to pre-pandemic figures by the programme's end.

Egypt has been facing harsh economic conditions since February 2022 due to the global and domestic ramifications of the war in Ukraine and the global supply chain crisis.

The crisis caused investors to withdraw approximately $20 billion in hot money from the Egyptian market; it forced the Central Bank of Egypt (CBE) to devalue the pound by 50 percent (according to official rates).

Cairo is seeking additional funding to close a $17 billion financing gap by 2026. The Egyptian government projects the gap for FY2023/2024 to be between $6 and $8 billion.

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