We would like to share with you and urgent update about Egypt.
Please find attached an official press release from the Central Bank of Egypt (CBE) outlining the monetary actions taking place to support the transition to a flexible inflation targeting regime.
Special MPC Press Release – 6 March 2024 1
The action:
The CBE increasing the overnight deposit rate, the overnight lending rate and the rate of the main operation by 600 basis points (to 27.25%, 28.25% and 27.75%).
The impact:
In February 2024, the CBE has already increased rates by 200 basis points and the current measures show how strongly the CBE intends to intervene breaking down inflation. This will make the domestic borrowing significantly more expensive and may cause additional cash flow issues for the Egyptian importers, whose operational costs will soar overnight. We also expect a temporarily elevated risk of non-payment of foreign debt, but further delays at minimum, in order to honour domestic borrowing obligations.
The step aims to unify the exchange rates and eliminate foreign exchange backlogs following the closure of the spread between the official and the parallel exchange rate markets. The most important news is that with the floating of EGP the Central Bank of Egypt enables a new exchange rate at 50 EGP to a US dollar.
Also, as a result and a show of confidence, The International Monetary Fund (IMF) indicated it would increase its current loan programme with Egypt by USD 5 billion, as the central bank let the pound plummet and said it would allow the currency to trade freely. The new agreement is an expansion of the USD 3 billion, 46-month Extended Fund Facility that the IMF struck with Egypt in December 2022, a key plank of which was meant to be a shift to a more flexible exchange rate system.
Should you face any payment issues in Egypt, please reach out to us as soon as possible so we can help you manage and recover your outstanding debt without delay.
