(AFP Photo)
Egypt’s domestic liquidity rose to EGP 1.268tn at the end of May compared to EGP1.094tn at end of June last year, registering an increase of 15.9% during the 2012/2013 fiscal year, the Central Bank of Egypt reported.
The report attributed the expansion in liquidity levels to a rise in the money supply, which grew by 20.9% to EGP 57.2bn, in addition to an increase in net local assets, which registered EGP 3.196bn.
Alaa Mostafa, financial expert and CFO at ElSewedy Cable and Electric Solutions Company, explained that a shifting purchasing behaviour among Egyptians is among the reasons behind the surge.
“In addition to an increase in the money supply, Egyptians have refrained from purchasing certain products, such as televisions, electronic equipment, computers, among others,” he said.
Mostafa added that the low level of investment was a primary reason as investors have converted their money to bonds.
Mohsen Adel, vice president of the Egyptian Society for the Study of Financing and Investment, also attributed the increase to dwindling investments in Egypt, in addition to shifting market behaviours.
“A low level of investments is one thing, but it is noticeable that banks have been following precautionary banking measures in local markets, which subsequently led to their clients following their footsteps,” Adel said.
He added that the increased demand on the US dollar on the black market was among the reasons behind the high levels of liquidity.
“We really should be capitalising on such news to increase investments, which is something that will require more effort to improve liquidity rates, instead of maintaining them the way they are now,” Adel said.
