Egypt's Central Bank Floats Pound, Raises Key Interest Rates 300 Basis PointsSource: www.export-egypt.com 11/3/2016, Location: Africa |
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Egypt's central bank decided to freely float the pound as it announced a set of measures aimed at alleviating a dollar shortage and stabilizing the country's flagging economy.
The central bank said its decision to liberalize the exchange rate is part of the government's reform program that aims at "trimming budget deficit and cutting public debt." The added that the new move is meant to "eliminate the black market, boost economy and achieve growth rates." The new measures included raising key interest rates by 300 basis points. The bank raised the overnight deposit rate, the overnight lending rate and the rate of the CBE's main operation to 15.75 percent, 15.25 percent and 15.25 percent respectively, the Central Bank of Egypt (CBE) said Thursday in a statement on its official website. The bank said there will be no limits on foreign currency deposit and withdrawal for both individuals and firms. However, it said, a previous cap of $50,000 cash deposit a month and $30,000 withdrawal a day for importers of non-essential goods would remain to be in place. The CBE has temporarily devalued the Egyptian currency by 48 percent to EGP 13 per dollar until it holds an exceptional forex auction at 1 p.m local time to leave the price for "the supply-and-demand mechanism." According to the statement, the CBE is allowing local banks to move within a10-percent margin above and below the above-mentioned exchange rate until the auction. The pound has held steady against the dollar at 8.78 at the CBE's weekly auctions since a 13.5 percent devaluation in March. The Egyptian pound has noticeably strengthened against the US dollar on the black market over the last two days. A trader in Cairo who asked to be anonymous told Ahram Online that the dollar’s rate has been significantly declining over the past two days to register around EGP 15 down from EGP 18.40. |
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