On Tuesday, the Central Bank of Egypt said it would sell $850 million in dollar treasury bills in an auction on January 2 to diversify sources of foreign exchange.
Since last March, the American dollar has risen against the Egyptian pound by more than 57% due to the country’s suffocating currency crisis. Economic analysts expected a new depreciation of the local currency. On Thursday, the Central Bank of Egypt raised the interest rate by 3%, 300 basis points, to 16.25% on deposits and 17.25% on lending. The bank is trying to rein in rising inflation and contain its pressures after a sharp drop in the value of the local currency. On Saturday, bankers said that Egypt’s approval of measures stipulated by the International Monetary Fund to approve a $3 billion loan, including switching to a flexible exchange rate system, is a precursor to an unprecedented wave of inflation and price hikes.
Banking expert Hani Aboul Fotouh said Egypt is on the verge of a situation similar to what the country witnessed in November 2016 following the first flotation of the local currency. Aboul Fotouh attributed the disruption of the government’s sale of its stakes in major national companies to Gulf sovereign funds and the decline in remittances from Egyptians abroad to the instability of the exchange rate in the country. He expected the Central Bank of Egypt to take urgent measures, stressing that the bank is now facing huge dilemmas regarding the liberalization of the local currency and fears that the US dollar will reach astronomical prices. The former vice president of Blom Bank, Tareq Metwally, said that the government had adopted wrong banking policies over the past five years, expecting an unprecedented rise in prices and inflation rates.