By Hossam Mounier
Massive ambiguity is surrounding the banking market following a surprising decision by the Central Bank of Egypt (CBE) to raise the dollar price against the Egyptian pound by 10 piasters.
The move was made in an auction launched by CBE to sell the US currency to banks, where the price of $1 amounted to EGP 7.63 in, compared to the previous EGP 7.53.
“The market is waiting for CBE’s next step with the start of the banks’ transactions Sunday morning. We cannot determine CBE’s position regarding the dollar price according to one increase it carried out,” said Haitham Abdel-Fattah, Head of the treasury sector at the Industrial Development and Workers Bank of Egypt.
Abdel-Fattah added: “The timing of that step is not understood, and we do not know if it is related to the last terrorist incidents Egypt witnessed or not.”
The previous increase of the dollar price against the Egyptian pound by the CBE occurred on 18 January. The US currency price increased by five piasters then, amounting to EGP 7.23. Therefore, CBE’s decision on Thursday is the second of its type in less than seven months.
Hany Mahfouz, Deputy Head of Treasury Sector at the Arab Investment Bank, believes that the new raise will lead to an increase in the costs of import goods. Consequently, this will lead to an increase the prices of most imported goods in the market, as well as production inputs, which means that we may face a new inflation wave in the next period.
Mahfouz added that the cost of importing wheat is also expected to increase and, consequently, the subsidy that the government offers for wheat would increase as well.
As for reports that the new move aims at attracting the foreign investors to the Egyptian market, Mahfouz said that the foreign investors will not think about entering the Egyptian market unless they are sure that they can obtain their money and transfer it abroad at any time. That is in addition to making sure Egypt’s economy and security is stable.