The Egyptian government reduced the value of the Egyptian pound on March 21 and moved its exchange rate against the US dollar, coinciding with the increase in the interest rate to absorb the exit of foreign investment from the country and control the high inflation wave.
The average exchange rate of the pound against the dollar amounted to 18.15 pounds for purchase, and 18.29 pounds for sale, according to the data of the Central Bank of Egypt, instead of 15.64 pounds for purchase and 15.74 pounds for sale.
Radwa El-Swaify, head of research at Al Ahly Pharos Securities Brokerage Company, said that the Central Bank of Egypt took several interrelated decisions, namely moving the pound exchange rate, rising interest rates by 1%, and public offering of high-return savings certificates to control the inflation rate. In addition, at the same time not negatively affecting the growth rate target in Egypt or the state budget deficit, in addition to compensating the savings owners for the expected inflation during this year.
The reasons for moving the pound price was likely to the global economic pressures, starting with the repercussions of the new Coronavirus pandemic two years ago, followed by the tightening of monetary policy in developed countries, led by the United States. As well as the Russian-Ukrainian war, which prompted the Central Bank of Egypt to move the price of the pound to prevent any speculation or pressure affecting negatively on foreign exchange reserves.
Three days before the official meeting, the Monetary Policy Committee of the Central Bank of Egypt had held an extraordinary meeting and raised the overnight deposit, lending rates, and the price of the main operation of the Central Bank by 100 basis points to reach 9.25%, 10.25% and 9.75% respectively. The credit and discount rate were also raised by 100 basis points to 9.75%.
The Egyptian economy achieved a growth of 9% during the first half of the fiscal year 2021/2022, which is the highest semi-annual growth rate since the beginning of the millennium, supported by the significant growth in the first and second quarters.
According to the official statement by the Central Agency for Public Mobilization and Statistics, the Consumer Price Index for Egypt reached 121.4 points for February 2022, an increase of 2% from January.
The annual inflation rate in Egypt recorded 10% for February 2022, compared to 4.9% for the same month of the previous year.
The Central Bank of Egypt aims to set the target inflation rate on average during the fourth quarter of 2022 at 7% (±2%) compared to 9% (±3%) during the fourth quarter of 2020.
