Central Bank of Egypt’s decisions strike blow to black market, say banking experts

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Egypt - The Central Bank of Egypt’s (CBE) decisions on Wednesday struck a severe blow to the black market, according to several banking leaders and experts.

Mohamed El-Etreby, Chairperson of Banque Misr and President of the Federation of Egyptian Banks and the Arab Banks Union, said that the CBE’s decisions will lead to the rapid disappearance of the parallel market. He explained that by liberalizing the exchange rate, banks can meet all the demands of exporters and open all the documentary credits.

ElMohamed El-Etreby, Chairperson of Banque Misr and President of the Federation of Egyptian Banks and the Arab Banks Union, said that the CBE’s decisions will lead to the rapid disappearance of the parallel market-Etreby also revealed that a foreign company deposited $25m in Banque Misr following the CBE’s decisions today.

Alaa Farouk, Chairperson of the Agricultural Bank of Egypt, praised the CBE’s Monetary Policy Committee’s decision to raise deposit and lending rates and allow the market to determine the exchange rate. He described it as a crucial and positive step that will significantly contribute to eliminating speculation and the parallel market for foreign currency.

Farouk noted that the CBE’s actions on Wednesday will increase the inflow of foreign currencies to the banking sector, which will stimulate production, stabilize commodity prices, and reduce inflation rates gradually. He also said that this will encourage direct foreign investments, which will have positive impacts on the overall economy and growth rates, as well as increase confidence in the Egyptian economy shortly.

Tamer Youssef, a banking expert specializing in asset management, believes that the main objective of the decisions is to attract direct foreign investments.

He explained that given the low local savings rates, direct foreign investments are vital for financing growth, as they enable the use of available production capacities in all economic sectors, thus stimulating growth.

Youssef emphasized that this will create new opportunities for the business community, generate new jobs, and increase sustainable foreign currency sources through the development and growth of export sectors of goods and services.

Youssef affirmed that the Ras El Hekma project deal, one of the largest direct investment deals in Egypt’s history, has boosted confidence in the Egyptian economy and its ability to attract more direct foreign investments. He also said that this would positively affect the exchange rate of the Egyptian pound against the US dollar and end the speculation and the black market.

He also believes that by continuing to tighten monetary policy and withdraw Egyptian pound liquidity from the markets through the CBE’s monetary policy tools, such as open market operations and raising interest rates, inflation will be curbed.