By Hossam Mounir
The Central Bank of Egypt (CBE) took a number of bold decisions and procedures in the first year of President Al-Sisi’s term, especially in its second half. The decisions were decreasing the value of the pound against the dollar, limiting deposits in foreign currency, and pumping large amounts foreign currency liquidity to cover the demands of the importer banks’ customers.
(Photo courtesy of Ministry of Finance)
“The brave decisions that the CBE took related to the exchange rate and eliminating the parallel market significantly contributed to increasing the amounts of dollars in the banks to more than the double on a daily basis. The decisions also have a positive effect on keeping the transfers of Egyptians abroad, estimated at around $19bn in the banks, whether in the form of deposits or concessions, which helped in increasing their sources of foreign currency, and opening more documentary credits needed for importers,” said Banque Misr Chairman Mohamed El-Etreby.
El-Etreby added that there were other decisions taken by CBE with regards to supporting the small and medium projects, mortgage finance, and the tourism sector, which had a positive effect on these important sectors of the Egyptian economy.
“The president also took a very brave step with regards to the elimination and reforming of subsidies, which contributed to decreasing the general budget deficit, and gave a good indication about increasing the growth rates during the upcoming period, especially as these decisions should have been taken long ago, because those who do not deserve the subsidies were taken them, which was increasing the burdens on the state,” he added.
El-Etreby noted that the International Monetary Fund and the World Bank praised the reforms taken by the government, and that the credit rating institutions raised their ratings of Egypt, all of which are positive factors that will strongly contribute to increasing the attractiveness of the Egyptian market to the investors.
The data obtained by Daily News Egypt indicates that the amount of the foreign currency the banks acquired increased from $10-15m daily before the last procedures of CBE, to $120-180m daily, currently. Moreover, approximately 90% of the remittances from abroad were going to the black market before these procedures, and a maximum of 10% were being left in the banks, which was reversed lately. The banks are now obtaining 90% of these remittances.
“The timing of the procedures the CBE took was very good, whereby they came after holding the Economic Summit, which was needed to completely eliminate the currency black market and the presence of two dollar prices in the market before,” said El-Sayed El-Kosayer, Chairman and Managing Director-Executive of Industrial Development and Workers Bank of Egypt.
According to El-Kosayer, these procedures had very positive effects on the exchange market, where they eliminated the black market and led to increasing the amounts of dollars in the banks, in addition to returning the remittances of Egyptians abroad to the banking sector, after the foreign currencies were being sold away from the banks.
He further clarified that “the CBE’s procedures, which are universally applicable, came in parallel with another procedure, which is pumping dollar liquidity in the banks to help them cover their importer customers as well as others. That contributed to more improvement in the exchange market”.
El-Kosayer believes that this transitional phase Egypt is going through, in which it suffers from the lack of foreign currency sources, requires everyone to unite and to give the priority to the national interest, in addition to activating the security procedures against the smugglers, and continuing the CBE’s procedures related to regulating the exchange market.
