The dollar declined in Egypt significantly in official trading during trading, today, Wednesday, as this comes in ِwiِth the rise in interest rates on government treasury bills
Over the past six weeks, the Egyptian Ministry of Finance has gradually raised the rates of interest on government treasury bills, with the total interest increase on 3-month bids reaching about 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 Treasury official confirmed that banks now prefer to invest liquidity surpluses in the central bank’s weekly deposit at 27.75% interest to avoid the burden of taxes on bills, which reduces the real interest on treasury bills to only about 21%. He added that the coming period will witness additional increases in interest rates on 3 and 6-month bills, approaching the corridor interest rate at the central bank.
Read also:DOT price forecast: what do you need to break the $20 level?
Dollar today against the Egyptian pound
The US dollar fell in Egypt, approaching the 49 level against the Egyptian pound in all Egyptian banks during today’s trading.
The highest price of the dollar so far against the Egyptian pound was recorded at Al Ahli Bank of Kuwait, reaching levels of 49.45 for buying, 49.55 for selling.
At the Central Bank, the dollar recorded today the level of 49.0346 pounds for buying, and 49.1739 for selling. Yesterday, the dollar hit 49.3052 for buying and 49.4392 for selling.
What stock should you buy in your next trade?
With stock valuations soaring in 2024, many investors feel uncomfortable investing more money in stocks. Not sure where to invest your money now? Check out our proven portfolios and discover high-potential investment opportunities.
In 2024 alone, ProPicks’ AI identified two stocks that jumped more than 150%, 4 more that jumped more than 30%, and another 3 that rose more than 25%. This is an impressive record.
With portfolios specifically designed to follow Dow Jones, S&P, technology and mid-cap stocks, you can explore various wealth building strategies.
