CAIRO: The Central Bank of Egypt (CBE) will allow more flexibility at exchange markets and to lift part of the Egyptian pound’s support against the U.S. dollar.
“Allowing more flexibility along with lifting part of the Egyptian pound’s support will cause 4-5percent decline compared to the dollar,” CBE inside source who preferred to remain anonymous told Al-Masry Al-Youm.
Through the will-applied flexibility measures, CBE will allow the foreign currency to soar against the Egyptian pound in the upcoming period, he said. Over the new soaring, dollar prices will range between 7.20 and 7.25 EGP in the official market instead of current 7.13 EGP.
CBE seeks to allow more flexibility at the exchange market to surround the back market of the dollar and to avoid criticism of such Standard & Poor’s (S&P) Ratings Agency, he said.
In its latest rating for Egypt, S&P classified Egypt’s monetary policy flexibility as low, criticizing CBE’s interventions in the foreign exchange market.
S&P’s report unveiled that the Egyptian pound decreased in value by 22 percent against the U.S. dollar since January 2011, although only about one per cent of that has been in 2014.
Since December 2013, CBE offered 200 periodical dollarized offers that totaled at $8.46 billion in addition to five exceptional dollarized bids of total $5.3 billion, Al-Ektesadeya news gate reported.
CBE aims to offer periodical and exceptional tenders of dollars to provide the needed liquidity for necessary goods’ importers and to surround the black market of dollar. The dollar price in the black market is worth 7.54 EGP, it reported.
Ahmed Sami, General Director of Commercial International Bank, told the Cairo Post that allowing more flexibility will be through decreasing the periodical and exceptional dollarized bids offered by CBE, he said and praised CBE’s interventions to prevent speculation at exchange markets and to prevent a black market.
Commenting on S&P’s criticism of CBE’s intervention, Sami unveiled that by the Capital Market Laws, CBE should not interfere in the exchange market. “We are in exceptional circumstances that require the intervention of CBE to control the black markets and to keep foreign reserves,” the source said.
In his response on whether the dollarized bids may impact foreign reserves at CBE, Sami explained that it balances between the market needs of foreign currencies, the volume of foreign reserves, the probable offers needed for controlling black markets, and to provide the importers’ need of dollars.