The Big Two introduce new USD CDs: State-owned banks Banque Misr and the National Bank of Egypt will today launch two new USD certificates of deposit as they look to shore up reserves of hard currency.

What’s on offer: The two lenders are offering two three-year certificates: one with a 9% annual percentage rate that pays out interest in EGP up front and another with a 7% rate that pays out in USD quarterly, they said in separate statements yesterday ( here and here — pdfs). Savers will have to deposit at least USD 1k to be eligible for the certificates, which will be repaid in USD when they reach maturity.

This is all to draw new FX into the banking system: The new CDs are designed to attract FX “especially from remittances, which have been declining recently,” economist Mona Bedeir told Enterprise. The NBE expects to draw more than USD 4 bn in fresh FX from the issuance, NBE Deputy Chairman Yehya Aboul Fotouh told Ala Mas’ouleety last night ( watch, runtime: 20:31).

Remittances are down despite booming GCC economies, suggesting that many Egyptians working abroad are sending cash back through informal means rather than through the banking system.

Remember: Egypt has been suffering a prolonged FX crunch triggered by the global shoc k caused by Russia’s war in Ukraine and rising interest rates. The EGP has lost almost half of its value against the greenback since March 2022, fuelling a resurgent parallel currency market that has placed further pressure on FX liquidity in the banking system.

ALSO- The 7% CDs will unlock soft EGP loans: Both state-owned banks attached a loan option to the 7% certificates that allows savers to take a local-currency loan equal to 50% of the deposit — up to a maximum of EGP 10 mn — at a subsidized interest rat e 2.25% below the central bank lending rate.

BUT- There are strings attached: “The loan has to go towards another certificate of deposit, a real estate investment, or a vehicle purchase,” Banque Misr Chairman Mohamed El Etreby told Yahduth Fi Masr last night ( watch, runtime: 6:37).

Egyptians have appetite for USD CDs: Savers have poured some USD 3.5 bn into the NBE’s previous three-year USD CDs, Aboul Fotouh said on Ala Mas’ouleety .

The CDs are also open for Egyptians abroad: Egyptians living abroad will also have the chance to invest in the CDs, Aboul Fotouh said.

No questions asked: The bank will not ask any questions about the source of the hard currency, regardless of the amount , he said.

An EGP loan for Egyptians abroad: The banks are also offering Egyptians who work abroad EGP loans of up to EGP 3 mn at a rate 2.25% below the corridor rate to be paid back in whatever currency they are paid in, El Etreby told Kelma Akhira ( watch, runtime: 18:51). The banks are also offering mortgage loans for Egyptian expats, in return for a 20% down payment to be paid in foreign currency.

The move received international attention: Bloomberg | Reuters | Xinhua.

Tags: