The Central Bank of Egypt (CBE) decided on Thursday to let banks in the market set their own exchange rate for the Egyptian pound against the US dollar through the inter banking system.

It also raised the return on the overnight deposit and lending by 300 basis points, registering 14.75% and 15.75% respectively. The main operation at the CBE was raised by 300 basis points to reach 15.25%. The credit and discount rates were raised by the same rate, reaching 15.25%.

The CBE allowed banks to keep their branches working until 9pm and on the weekend to continue buying and selling currency and provide services for remittances.

According to a statement from the CBE, the decision aims to stress confidence in the Egyptian economy and achieve monetary stability targeted to lower inflation levels.

The statement added that the bank will be taking several measures to reform the foreign currency exchange policies through liberating the rates and give banks more flexibility in pricing their currency trade operations, which aims to keep hard cash in the official market and eliminate the black market.

The decision comes in line with the integrated reform system that includes a programme of structural reforms of the government’s public finances.

The CBE said that the integrated monetary and fiscal reforms package enables the Egyptian economy to face current economic challenges, promote its capabilities, and achieve desired growth and operation rates, by combining and adapting to the present capabilities and utilise the full range of Egypt’s natural and material resources.

In the same context, the CBE stated it will not impose any conditions on giving up foreign currency and stressed it will guarantee depositors’ funds at the banking sector for all currencies. Moreover, the statement noted that there would not be restrictions on deposits or withdrawals of hard cash for individuals and companies. It pointed out that it will keep the same caps on companies that import non-essential goods at $50,000 per month on deposits and $30,000 on withdrawals.

The CBE’s decision comes as part of the government’s economic reform programme. The programme aims to reduce the budget deficit and public debt through subsidy reform measures and the rationalisation of government spending; reducing private imports; increasing exports; encouraging local and foreign investment, and launching an IPO programme at the Egyptian Exchange.

Furthermore, the reform programme also aims to balance between the required rationalisation and full effects of the decision on low-income citizens by the expansion of integrated social protection programmes and committing the CBE to secure the necessary hard cash to import basic goods.

The CBE’s decisions to float the exchange rate is aimed at keeping foreign currency within the banking sector, which could put an end to the fluctuations on the black market by keeping the exchange rate dependent on supply and demand that reflects the real rates.

The new exchange rate system is also part of the reforms that support the CBE’s goal of focusing on inflation and stabilise prices in the middle of the banking term.

From here, the CBE will closely monitor developments in this system to ensure its effectiveness and will not hesitate to use all its authority and power to keep the currency market stable and maintain a commodities market without price hikes, the statement read.

In addition, the CBE urged all players in the market to cooperate for the success of the system for Egypt’s national good. It called upon them to keep trading currency only through officially announced channels. It warned that unofficial trading is banned by Law No. 88 for 2003 and its subsequent amendments.

In this regard, the CBE said it will launch a hotline centre starting on Sunday under 16775 to receive complaints about violations carried out by banks or exchange bureaux, especially in terms of banks not accepting deposits or processing withdrawals in hard cash. It will also focus on reports about currency changing hands outside the market or the announced prices.

The CBE has been working to boost the strength and rigidity of the banking system in terms of profitability and basic indicators of liquidity and the strength of capital. The banking system achieved an earnings growth rate of 55.4% in June 2016 compared to the same period the previous year, with a total net profit of EGP 33bn and sheer assets worth EGP 3,067bn, the statement read.

“The CBE’s policies are studied with precision and stem from its belief in its national role to protect the nation and contribute to enabling the country to overcome crises, to set off towards increasing growth, promising future and prosperity that meets the aspirations of this great nation,” the CBE concluded.