Cairo – Mubasher: The Central Bank of Egypt (CBE) plays no role in the foreign currency exchange (FX) market, Middle East News Agency (MENA) reported on Friday, citing deputy CBE governor Gamal Negm as saying.
The recent decline in the value of the US dollar is attributable to increased inflows to the banking sector, Negm told MENA on the sidelines of the forum for Enhancing Financial Stability in Sharm El Sheikh.
He added that cash inflows entering the banking sector on the back of foreign investments in treasury bills, remittances and citizens exchanging the dollar for Egyptian pounds amounted to $2 billion.
The banking market is currently based on “supply and demand”, Negm said, adding that he expects the US dollar to continue to decline if left to market mechanisms.
As for the CBE’s decision, announced late Thursday, which entailed raising interest rates by 2% or 200 basis points (bps), the deputy governor confirmed that the decision aims to limit the rising inflation and its effects following the increase in energy prices.
He expects a rise in the purchasing power of the Egyptian pound after the interest rate hike and further cash inflows into the country’s banking sector.
The CBE’s interest rate hike involved raising overnight deposit and lending rates to 18.75%, and 19.75%, respectively.
In May, Egypt recorded a decline in annual headline inflation, the first time since October 2016, to 29.7% from 31.5% in April.
