CBE lets EGP devaluate for 3rd time since March as big two state-owned banks announce 25% CDs

1/5/2023 9:00:00 AM

The Central Bank of Egypt made a big move on the FX front yesterday, allowing the EGP to slide against the greenback at the same time as the nation’s two largest banks announced high-yield local-currency certificates of deposit.

The CBE has depreciated the Egyptian pound against the US dollar by about 10 percent for the third time since March.

The step has led to the USD dollar rate to rise suddenly at Wednesday’s transactions in major Egyptian banks after remaining stable for long. The Egyptian pound lost over 10 percent of its value against the US dollar in Wednesday’s transactions at major banks.

The rate of the USD dollar rose against the Egyptian pound to a record high reaching EGP 26.3894 for buying and EGP26.4778 for selling, according to the latest data issued by the Central Bank of Egypt.

The main goal of such move was to convince people with hard currency deposits in the banking system to de-dollarize.

The move was also made in order to get people holding FX outside the banking system to bring it in so that the black market will disappear with time and to tamp down on inflation by reducing liquidity in the market.

That’s the EGP’s biggest single-day drop since last October’s devaluation, which the CBE said at the time marked its move to a “durably flexible” exchange rate. The EGP has now fallen by over 34% against the greenback from the rate before the October deval and is down by almost 70% from its 15.78 / USD level immediately before the devaluation in March 2022.

Egypt's NBE, Banque Misr issue new 25&% certificates, highest ever on record

The National Bank of Egypt (NBE) and Banque Misr have issued new one-year maturity saving certificates with a 25 percent yield after one year, the highest yield on record, the two banks announced on Wednesday.

Banque du Caire has yet to follow suit. Buyers can opt for a one-time payment of 25% when their CDs mature in 12 months' time, or can go for monthly interest payouts at a reduced 22.5% annualized rate.