{"id":614481,"date":"2024-02-02T00:00:00","date_gmt":"2024-02-02T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2024\/02\/02\/the-central-bank-of-egypt-hikes-interest-rates-by-200-bps-were-still-waiting-to-hear-from-imf\/"},"modified":"2024-02-02T00:00:00","modified_gmt":"2024-02-02T00:00:00","slug":"the-central-bank-of-egypt-hikes-interest-rates-by-200-bps-were-still-waiting-to-hear-from-imf","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2024\/02\/02\/the-central-bank-of-egypt-hikes-interest-rates-by-200-bps-were-still-waiting-to-hear-from-imf\/","title":{"rendered":"The Central Bank of Egypt hikes interest rates by 200 bps + We\u2019re still waiting to hear from IMF"},"content":{"rendered":"

Good morning, friends, and happy Friday. <\/strong>We hope you have a warm and restful weekend on these very chilly days.<\/p>\n

On this cold morning, we think more of people in need. <\/strong>And in our Enterprise Guide this week we will try to help you with some tips to incorporate small acts of kindness into your routine that doesn\u2019t always require grand excursions and lengthy commitments.<\/p>\n

Enterprise Weekend comes out each Friday at 9:00am CLT.<\/strong> We\u2019ll be back on Sunday at 6am with EnterpriseAM. Until then: Enjoy the weekend. <\/p>\n

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LAST WEEK IN 3 MINS-<\/p>\n

ECONOMY- <\/strong><\/p>\n

#1- The Central Bank of Egypt (CBE) hiked interest rates by 200 basis points last night<\/strong> as it looks to preempt an anticipated rise in inflation, the bank said in a statement<\/a> following its policy meeting. The first hike since August came as \u201cwidespread inflationary pressures remain elevated, continuing to impact pricing and consumption behaviours. Moreover, geopolitical uncertainty and ongoing maritime trade disruptions continue to raise domestic and global inflationary pressures,\u201d the bank said.<\/p>\n

Where rates now stand: <\/strong>The deposit rate is now at 21.25%, the lending rate at 22.25% and the main operation and disc. rates at 21.75%. The central bank has now hiked rates by 1.3k bps since March 2022.<\/p>\n

Only a few saw this coming: <\/strong>While a number of analysts in our customary interest rate poll<\/a> expected the CBE to keep rates on hold, to be paired \u2014 sooner or later \u2014 with devaluation when we finalize a new agreement with the IMF, a smaller number anticipated yesterday\u2019s hike. \"The latest IMF's comments on the loan program review and ongoing discussions signal a shift in priorities toward inflation targeting, suggesting a probable monetary tightening in the coming months. That said, we expect a 150-200 bps hike,\" Ahmed Hafez<\/strong>, Head of Research at Beltone Holding, told Enterprise before the meeting. Economist Mona Bedeir<\/strong> also saw the bank moving forward with a 200 bps rate hike \u201cbecause monetary tightening has become an urgent necessity at the current stage.\u201d<\/p>\n

#2- A new IMF package and up-coming devaluation could be in the cards: <\/strong>Egyptian officials appear to be nearing<\/a> a staff-level agreement with the International Monetary Fund for a new \u2014 and bigger\u2014 support package.<\/p>\n

But there\u2019s no consensus on how big the loan will be<\/strong>, with local and international outlets have put the figure between USD 6-10 bn, while four sources with knowledge of the matter told Enterprise on Tuesday that the agreement nearing completion is worth c. USD 9 bn. <\/p>\n

In all cases, the value of the program will include the USD 3 bn the IMF had originally<\/strong> committed,<\/strong> but the exact figure will hinge on if, and by how much, the government chooses to devalue the EGP. <\/p>\n

#2- The IMF <\/strong>downgraded<\/a><\/strong> our growth forecast to 3.0% for the current fiscal year<\/strong>, down 0.6 percentage points from its last projection in October, in its updated World Economic Outlook (pdf)<\/a>. The Fund also lowered its MENA growth outlook for the year by 0.5 percentage points, now expecting regional growth to pick up to 2.9% in 2024. The Fund pointed to temporary oil cuts in Saudi Arabia as the main driver behind the slashed outlook for the region.<\/p>\n

#3- <\/strong>S&P Global Ratings <\/strong>thinks<\/a><\/strong> the authorities will devalue the EGP by half<\/strong>, as part of efforts to unlock the remainder of the IMF package, the rating agency said in a report<\/a>. Once the devaluation is through, S&P sees the EGP trading at \u201ca level that is more in line with the parallel market rate, which is currently at about 60 USD \/ EGP.\u201d The rating agency thinks that \u201cmore clarity on exchange rate policy would benefit trade and economic growth and trigger an increase in remittance inflows.\u201d <\/p>\n

BANKING-<\/strong><\/p>\n

A new bank is in town: <\/strong>British multinational bank Standard Chartered<\/a> \u2019s newly formed local arm Standard Chartered Egypt<\/a> has officially begun banking operations after getting the final go-ahead from the central bank, according to a statement (pdf)<\/a> from the bank on Tuesday.<\/p>\n

** We sat down with the lender\u2019s Egypt CEO Mohammed Gad <\/strong>to discuss why Egypt, why now, and what the bank is hoping to achieve in its first year here. Check it out here<\/a>.<\/p>\n

PRIVATIZATION WATCH- <\/strong><\/p>\n

Gov\u2019t gears up to sell off or repurpose state-owned properties: <\/strong>President Abdel Fattah El Sisi issued a decree that will see the government transfer its ownership<\/a> of a set of ministerial headquarters \u2014 including Cairo landmarks like the Foreign Ministry's Nile-side HQ \u2014 to the Sovereign Fund of Egypt (SFE), according to a decision published in the Official Gazette. The ministries listed under the decision will continue operating in their current buildings until they are moved to the new capital or another location, the decision read.<\/p>\n

REAL ESTATE-<\/strong><\/p>\n

Updates on the real-estate-for-FX scheme:<\/strong> Amid talk that the government is working to clone the expat car import initiative for real estate, real estate players and gov\u2019t officials met to discuss the fine print<\/a>. The latest proposals for the fresh initiative could see the government refund 80% of the property price to the buyers in EGP over an 8-10 year period.<\/p>\n

WHAT\u2019S HAPPENING NEXT WEEK-<\/strong><\/p>\n

<\/p>\n

Here are the key news triggers<\/strong> on which to keep your eyes on next week. <\/p>\n