Egypt Watch

CNBC: Egyptian pound ranked sixth among the worst-performing currencies

According to CNBC, the Egyptian pound ranked sixth among the worst-performing currencies since the beginning of last January, continuing its decline, which caused it to lose more than half of its value during 2022. Since the beginning of the year, the Egyptian pound has fallen against the US dollar by nearly 20%, yet analysts expect the Egyptian currency to continue its decline. CNBC quoted experts as saying that the significant economic issues afflicting the largest country in the Middle East is regarding the population mean that the Egyptian pound still has a way to collapse further.

Egypt’s Central Agency for Public Mobilization and Statistics said in February that annual inflation jumped to its highest level in five and a half years, recording 31.9%. On Sunday, the Central Bank of Egypt announced that the interest rate on treasury bills had risen, reaching a new record high, exceeding 23%. However, the Egyptian government accepted only eight offers totalling about EGP 79 million. Banks offered to buy treasury bills worth 21.2 billion Egyptian pounds, while they asked for interest between 22.5% and 25.5%.

Banking expert Hani Aboul Fotouh considered that the interest rate hike reflected the Central Bank of Egypt’s Monetary Policy Committee’s decision last month to raise interest rates to rein in inflation, expecting a further rise in interest rates. “Raising interest rates is reflected in lending and borrowing, including government requests to borrow from banks to finance the deficit between its expenditures and revenues,” he added.

A financial analyst, who declined to be named, said that the government is also using the bids to attract foreign investments in Egyptian debt instruments, allowing it to collect hard currency, even for a relatively limited time. “However, until now, foreigners’ appetite to invest in Egyptian debt instruments has not witnessed any improvement, given the rise in inflation locally to 31.9% last February, which means that the real interest rate is currently a negative value,” he said. “The problem is that the global interest rate is high, and Egypt has become a high-risk market.”