By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
DailynewsegyptDailynewsegypt
  • Home
  • Business
    BusinessShow More
    Egypt to issue new bonds for climate, social goals
    Egypt to issue new bonds for climate, social goals
    September 27, 2023
    Saudi Public Investment Fund eyes stake in Palm Hills Development
    Saudi Public Investment Fund eyes stake in Palm Hills Development
    September 27, 2023
    UNDP, MBRF launch online learning initiative for Arab countries
    UNDP, MBRF launch online learning initiative for Arab countries
    September 27, 2023
    Egypt Post invests in Roaderz platform to enhance e-commerce, delivery services
    Egypt Post invests in Roaderz platform to enhance e-commerce, delivery services
    September 27, 2023
    GAFI to grant 45 more golden licences to boost investment
    GAFI to grant 45 more golden licences to boost investment
    September 27, 2023
  • Politics
    PoliticsShow More
    Egypt’s Irrigation Minister highlights climate challenges for water sector
    Egypt’s Irrigation Minister highlights climate challenges for water sector
    September 27, 2023
    CCCPA, Senghor University join forces for African peace, development
    CCCPA, Senghor University join forces for African peace, development
    September 27, 2023
    Arab League chief urges more funding, investment for food security
    Arab League chief urges more funding, investment for food security
    September 27, 2023
    Egypt denounces Houthi attack on Bahraini forces in Saudi Arabia
    Egypt denounces Houthi attack on Bahraini forces in Saudi Arabia
    September 27, 2023
    vPalestine urges international action to end Israeli occupation, crimes
    Palestine urges international action to end Israeli occupation, crimes
    September 26, 2023
  • Interviews
    InterviewsShow More
    Microsoft Egypt aims to provide advanced AI models, build solid AI ecosystem: Mirna Arif
    Microsoft Egypt aims to provide advanced AI models, build solid AI ecosystem: Mirna Arif
    September 18, 2023
    I love privacy, and I am not concerned about competition: Yasmine Sabry
    I love privacy, and I am not concerned about competition: Yasmine Sabry
    September 14, 2023
    Sustainability, digital transformation at the heart of our strategy: Heidelberg Materials Egypt
    Sustainability, digital transformation at the heart of our strategy: Heidelberg Materials Egypt
    September 12, 2023
    India welcomes Egypt's BRICS membership: Boosting trade, investment, and access to strategic commodities
    India welcomes Egypt’s BRICS membership: Boosting trade, investment, and access to strategic commodities
    September 11, 2023
    The box office is not a measure of success: Basma Hassan
    The box office is not a measure of success: Basma
    September 6, 2023
  • Culture
  • Opinion
  • Sports
  • Lifestyle
Reading: CBE justifies complete liberalisation of EGP’s exchange rate
Share
Notification
Latest News
Genetically engineering associations between plants and nitrogen-fixing microbes could lessen dependence on synthetic fertilizer
Genetically engineering associations between plants and nitrogen-fixing microbes could lessen dependence on synthetic fertilizer
Science
Earthworms contribute to 6.5% of global grain production, says new research
Earthworms contribute to 6.5% of global grain production, says new research
Science
Researchers build and test a framework for achieving climate resilience across diverse fisheries
Researchers build and test a framework for achieving climate resilience across diverse fisheries
Science
Egypt to issue new bonds for climate, social goals
Egypt to issue new bonds for climate, social goals
Business
Saudi Public Investment Fund eyes stake in Palm Hills Development
Saudi Public Investment Fund eyes stake in Palm Hills Development
Business
Aa
Aa
DailynewsegyptDailynewsegypt
  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle
  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle
Have an existing account? Sign In
Follow US
  • Advertise
© 2023 DNE News. All Rights Reserved.
Dailynewsegypt > Blog > Business > Banking > CBE justifies complete liberalisation of EGP’s exchange rate
Banking

CBE justifies complete liberalisation of EGP’s exchange rate

Hossam Mounir
Last updated: 2022/10/30 at 12:04 AM
By Hossam Mounir 6 Min Read
Share
CBE justifies complete liberalisation of EGP’s exchange rate
SHARE

The Central Bank of Egypt (CBE) surprised the global and local financial markets with a package of bold decisions on Thursday, on top of which was the complete liberalisation of the exchange rate and the adoption of a flexible exchange rate, raising interest rates by 2% at once and announcing the start of work on building a market for financial derivatives.

The CBE explained that the global economy faced many shocks and challenges that it had not witnessed for years, as global markets were recently exposed to the spread of the COVID-19 pandemic and closure policies, followed by the breakout of the Russian-Ukrainian War, both of which had severe economic repercussions.

Flexible exchange rate

In light of this extraordinary circumstances, these reform measures were taken to ensure macroeconomic stability and achieve sustainable and comprehensive economic growth, with the CBE pointing out that in order to achieve this, the exchange rate will reflect the value of the EGP against other foreign currencies by the forces of supply and demand within the framework of a flexible exchange rate system, with the top priority being price stability, as this will also enable it to work on forming and maintaining sufficient levels of international reserves.

Eliminating documentary credits

The CBE also promised the business community that it will gradually cancel the instructions issued on November 13, 2022, regarding the use of documentary credits in import operations, noting that they will be completely repealed by December 2022 and this measure will serve as an incentive to support economic activity in the medium term.

In its first steps to implement this plan, the CBE decided to increase the value of shipments that are imported with collection documents to $500,000 instead of $5,000 or its equivalent in foreign currencies.

Building and developing the financial derivatives market

Furthermore, the CBE revealed that it will work to build and develop the financial derivatives market to enhance the foreign exchange market and raise liquidity in foreign currency.

In order to achieve this, the CBE decided to allow banks to offer FX forwards to their corporate clients, provided that their purpose is to cover customer positions resulting from commercial operations represented in documentary credits, collection documents, supplier facilities, or profit transfers to foreign shareholders for a specific date abroad, or the goods and services export earnings received by the bank’s customers.

The bank would obtain proof that the operation is commercial while taking into account that customers are not allowed to carry out such operations for speculative purposes.

The CBE will also allow banks to carry out forward exchange operations with each other locally for non-speculative purposes, in addition to allowing them to carry out exchange rate swaps (FX swaps) for corporate clients, provided that their purpose is to cover customer positions resulting from the aforementioned commercial operations — which will be carried out through the same bank — emphasising the possibility of carrying out the same operations with local banks only.

Unbanning non-deliverable forward exchange transactions

Moreover, the CBE is lifting the previous ban on banks regarding non-deliverable forwards for clients that include banks, institutions, or individuals, while allowing banks to carry out these operations for corporate clients.

It also stressed that banks should observe the controls for granting credit, making sure not to offer credit facilities or provide financing to customers or any activity in foreign exchange unless they have fully ascertained that these clients have sources of payment in foreign currency and pledge to use them in payment.

Basic rate hike by 2%

Additionally, the CBE said that it aims to support the goal of price stability in the medium term and its Monetary Policy Committee decided in its extraordinary meeting last Thursday to raise the overnight deposit and lending rates and the price of the main operation of the CBE by 200 basis points to 13.25%, 14.25%, and 13.75%, respectively, and the credit and discount rate was raised by the same percentage to reach 13.75%.

According to the CBE, the increase in global and local prices is expected to lead to a rise in the general inflation rate from its target, which is 7% (±2%) on average during the fourth quarter (4Q) of 2022.

For its part, the MPC stressed that the objective of raising interest rates is to contain inflationary pressures caused by the demand side, the high rate of domestic liquidity growth, inflationary expectations, and the secondary effects of supply shocks, pointing out that it will continue to announce the inflation target rates — which started in 2017 — in a consistent manner, with the target being a downward trajectory in inflation rates.

According to the committee, the inflation policy succeeded in reducing inflation rates until the recent global shocks.

Finally, the CBE stressed that it will closely keep an eye on all economic developments and that it will not hesitate to use its monetary tools to achieve price stability.

You Might Also Like

CBE completes third phase of money market development project

Banks’ financial position grows to EGP 13.798trn in 1H 2023, CBE reports

CBE to decide on interest rate on Thursday amid high inflation

Banks operating in Egypt record EGP 126.9bn of net profits in 1H 2023

Banque du Caire launches new security control unit

TAGGED: CBE
Share this Article
Facebook Twitter Email Print
Previous Article Banks ready to work with financial derivatives Banks ready to work with financial derivatives
Next Article Women constitute the largest share of the world populations, close to 1.9 billion across all continents. Unfortunately, at my home country, Uganda, a couple of women were violated through sexual harassment and isolation from different activities. Opinion| Gender equality is at the forefront of COP27
Ad image
Ad image

Stay Connected

Facebook Like
Twitter Follow
Instagram Follow
Youtube Subscribe

Latest News

Genetically engineering associations between plants and nitrogen-fixing microbes could lessen dependence on synthetic fertilizer
Genetically engineering associations between plants and nitrogen-fixing microbes could lessen dependence on synthetic fertilizer
Science
Earthworms contribute to 6.5% of global grain production, says new research
Earthworms contribute to 6.5% of global grain production, says new research
Science
Researchers build and test a framework for achieving climate resilience across diverse fisheries
Researchers build and test a framework for achieving climate resilience across diverse fisheries
Science
Egypt to issue new bonds for climate, social goals
Egypt to issue new bonds for climate, social goals
Business
//
Egypt’s only independent daily newspaper in English. Discuss the country’s latest with the paper’s reporters, editors, and other readers.

Quick Link

  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle

Sign Up for Our Newsletter

Subscribe to our newsletter to get our newest articles instantly!

© 2023 DNE News. All Rights Reserved.

Join Us!

Subscribe to our newsletter and never miss our latest news, podcasts etc..

Zero spam, Unsubscribe at any time.

Removed from reading list

Undo
Welcome Back!

Sign in to your account

Lost your password?