The exchange rate of the dollar against the Egyptian pound fell below the level of 49 pounds by the end of Thursday’s trading, after last week witnessed rises that pushed the dollar to 49.55 pounds.
Last week’s rallies are due to global economic developments, including US economic data that indicated the possibility of the economy entering a recession, as well as a possible escalation in the Middle East.
Increasing the yield on treasury bills
Meanwhile, over the past six weeks, Egypt’s Ministry of Finance has gradually raised rates on government treasury bills, with the overall interest increase on 3-month bids reaching around 3%.
Analysts and bankers who spoke to Arabic said that raising yields comes as part of the ministry’s efforts to pay old maturities and reduce the budget deficit, in addition to the pressure imposed by investors to demand positive returns after taxation. The Ministry of Finance aims to reduce the public debt ratio to 88.2% of GDP during the fiscal year 2024-2025, reaching 80% by the end of June 2027, to reduce the burden on the state budget.
Mahmoud Najla, executive director of fixed income markets at NCFI, told Arabic that the ministry has gradually raised interest on government debt instruments due to previous bids and trying to control the budget deficit. He added that the pricing of treasury bills depends on supply and demand, and with the decline in demand from banks and investors, the ministry was forced to raise yields, especially on 3- and 6-month bills.
Najla pointed out that large inflows into Egypt from deals such as the sale of Ras al-Hikma or the huge foreign subscriptions in treasury bills during March and April reduced the government’s need to borrow, prompting the ministry to refuse to raise interest rates and abandon some bids.
In a related context, an official in the treasury department of a bank indicated that the interest hike on treasury bills was expected and will increase further during the coming period with the maturity of huge bids received by the ministry after the liberalization of the exchange rate. He added that the apparent reluctance of local investors to subscribe to treasury bills due to negative after-tax interest rates prompted the ministry to abandon low interest.
After the CBE raised interest rates by 6% in March, the ministry raised the rate on bills to 32%, but quickly cut it by the same percentage after the first two weeks of floating the pound as a result of the increasing cost of debt and the availability of foreign inflows.
Financial analyst Mona Bdeir believes that the decline in foreign investors’ requests to subscribe to treasury bills since the beginning of June, along with the tendency of banks to invest liquidity surpluses in the weekly central bank deposit, reduced the demand for bills, prompting the ministry to increase interest rates. Geopolitical risks have also contributed to reducing demand for domestic debt instruments, forcing the ministry to abandon low interest rates.
The return of remittances of Egyptians abroad
The past few months have witnessed a significant increase in the value of remittances from Egyptians working abroad, coinciding with the absence of a black market and the stability of the exchange rate at levels ranging between EGP 48 and EGP 49 in recent trading.
The Central Bank of Egypt explained that the remittances of Egyptians abroad jumped to $ 7.5 billion during the period from April to June 2024, compared to about $ 4.6 billion in the corresponding period last year, an increase of $ 2.9 billion.
He explained that remittances of Egyptians abroad rose for the fourth consecutive month last June to $ 2.6 billion, compared to $ 1.5 billion during the same month of 2023, an increase of about 65.9%.
Thus, remittances more than double what they achieved before the reform measures taken on March 6, 2024, where they were limited last February to about $ 1.3 billion.
Dollar today against the Egyptian pound
The US dollar fell in Egypt low 49 against the Egyptian pound in Egyptian banks at the end of trading today.
The highest price of the dollar against the Egyptian pound was recorded at Abu Dhabi Islamic Bank, reaching levels of 49.07 for buying, 49.17 for selling.
At the Central Bank, the dollar recorded today the level of 48.8351 pounds for buying, and 48.9742 for selling. Yesterday, the dollar recorded 49.0346 for buying, and 49.1739 for selling.
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