Egypt’s Central Bank Faces Multiple Crises, Limited Options

The Central Bank of Egypt (CBE) in Cairo, Egypt (Reuters)
The Central Bank of Egypt (CBE) in Cairo, Egypt (Reuters)
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Egypt’s Central Bank Faces Multiple Crises, Limited Options

The Central Bank of Egypt (CBE) in Cairo, Egypt (Reuters)
The Central Bank of Egypt (CBE) in Cairo, Egypt (Reuters)

The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) will hold a periodic meeting on Thursday when options to contain successive shocks to the Egyptian economy remain limited before growing local and global crises.

CBE will likely raise interest rates at today’s meeting to curb inflation, which has risen to unprecedented levels in Egypt.

Raising interest, however, will reduce chances of increasing growth rates in a country where the population exceeds 100 million people.

Moreover, it will increase the burden of debt service on the government.

CBE is forecast to hike its overnight interest rates by 200 basis points as it struggles to bring soaring inflation under control, a Reuters poll showed on Monday.

The median forecast in a poll of 15 analysts is for the bank to increase its deposit rate to 18.25% and its lending rate to 19.25% at its regular monetary policy committee (MPC) meeting. Seven of the analysts expected an increase of 300 bps.

At its last meeting on Feb. 2, the central bank left rates steady despite analyst expectations of a 150 bps increase, saying steep rate hikes put in place over the previous year should help to tame inflation, which in December had accelerated to a five-year high of 21.3%.

The central bank had raised rates by a total of 800 bps since Russia invaded Ukraine in early 2022.

With 12-month non-deliverable forward (NDF) rates now over 40 per dollar, another large-scale pound devaluation was just a matter of time, said Gergely Urmossy at Societe Generale.

“No time like the present to align foreign exchange rates with fundamentals,” Urmossy said, adding that the March 30 policy announcement was "one of the most anticipated events in the African Frontier space."

The weakening currency and soaring inflation, which in February hit a five-and-a-half-year high of 31.9%, also put more pressure on the central bank to raise rates, even if it adds to the costs of servicing climbing government debt.



China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)
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China Mulls Draft Law to Promote Private Sector Development

A Chinese national flag flutters on a financial street in Beijing. (Reuters)
A Chinese national flag flutters on a financial street in Beijing. (Reuters)

Chinese lawmakers are deliberating a draft of the country's first basic law specifically focused on the development of the private sector, the country’s Xinhua news agency reported.

“The law will be conducive to creating a law-based environment that is favorable to the growth of all economic sectors, including the private sector,” said Justice Minister He Rong, while explaining the draft on Saturday during the ongoing session of the Standing Committee of the National People's Congress, the national legislature.

The draft private sector promotion law covers areas such as fair competition, investment and financing environments, scientific and technological innovation, regulatory guidance, service support, rights and interests protection and legal liabilities.

The draft has incorporated suggestions solicited from representatives of the private sector, experts, scholars and the general public, the minister said.

China left its benchmark lending rates unchanged as expected at the monthly fixing on Friday.

Persistent deflationary pressure and tepid credit demand call for more stimulus to aid the broad economy, but narrowing interest margin on the back of fast falling yields and a weakening yuan limit the scope for immediate monetary easing.

The one-year loan prime rate (LPR) was kept at 3.10%, while the five-year LPR was unchanged at 3.60%.

In a Reuters poll of 27 market participants conducted this week, all respondents expected both rates to stay unchanged.

Morgan Stanley said in a note that the 2025 budget deficit and mix are more positive than expected and suggest Beijing is willing to set a high growth target and record fiscal budget to boost market confidence, but further policy details are unlikely before March.

Last Friday, data released by the country's central bank said total assets of China's financial institutions had risen to 489.15 trillion yuan (about $68.03 trillion) by the end of third quarter this year.

The figure represented a year-on-year increase of 8%, said the People's Bank of China.

Of the total, the assets of the banking sector reached 439.52 trillion yuan, up 7.3% year on year, while the assets of securities institutions rose 8.7% year on year to 14.64 trillion yuan.

The insurance sector's assets jumped 18.3% year on year to 35 trillion yuan, the data showed.

The liabilities of the financial institutions totaled 446.51 trillion yuan, up 8% year on year, according to the central bank.

Separately, data released by the National Energy Administration on Thursday showed that China's electricity consumption, a key barometer of economic activity, rose by 7.1% year on year in the first 11months of the year.

During the period, power consumption of the country's primary industries increased by 6.8% year on year, while that of its secondary and tertiary sectors rose by 5.3% and 10.4%, respectively.

Residential power usage saw strong growth of 11.6% during this period, the administration said.

In November alone, power usage climbed 2.8% from one year earlier, according to the data.