On Tuesday, the Central Bank of Egypt sold $850 million dollar-denominated treasury bills. The treasury bills’ interest increased to 4.64-4.651%, compared to 4.59-4.6% in the last similar offering last December. According to financial analysts, the interest rate increase is slight and comes in response to global economic variables, including the US Federal Reserve’s interest rate increase.
Last November, Fitch changed its view of the future of the Egyptian economy from stable to negative due to the deterioration of the dollar liquidity situation and the low prospects for accessing the bond markets. This prompts investors to demand a greater return in light of the high level of risk, in addition to a significant retreat from investing in treasury bills in local currency.
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 a recent 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.