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)
TT

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.



Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
TT

Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)

Saudi Arabia’s non-oil exports soared to a two-year high in May, reaching SAR 28.89 billion (USD 7.70 billion), marking an 8.2% year-on-year increase compared to May 2023.

On a monthly basis, non-oil exports surged by 26.93% from April.

This growth contributed to Saudi Arabia’s trade surplus, which recorded a year-on-year increase of 12.8%, reaching SAR 34.5 billion (USD 9.1 billion) in May, following 18 months of decline.

The enhancement of the non-oil private sector remains a key focus for Saudi Arabia as it continues its efforts to diversify its economy and reduce reliance on oil revenues.

In 2023, non-oil activities in Saudi Arabia contributed 50% to the country’s real GDP, the highest level ever recorded, according to the Ministry of Economy and Planning’s analysis of data from the General Authority for Statistics.

Saudi Finance Minister Mohammed Al-Jadaan emphasized at the “Future Investment Initiative” in October that the Kingdom is now prioritizing the development of the non-oil sector over GDP figures, in line with its Vision 2030 economic diversification plan.

A report by Moody’s highlighted Saudi Arabia’s extensive efforts to transform its economic structure, reduce dependency on oil, and boost non-oil sectors such as industry, tourism, and real estate.

The Saudi General Authority for Statistics’ monthly report on international trade noted a 5.8% growth in merchandise exports in May compared to the same period last year, driven by a 4.9% increase in oil exports, which totaled SAR 75.9 billion in May 2024.

The change reflects movements in global oil prices, while production levels remained steady at under 9 million barrels per day since the OPEC+ alliance began a voluntary reduction in crude supply to maintain prices. Production is set to gradually increase starting in early October.

On a monthly basis, merchandise exports rose by 3.3% from April to May, supported by a 26.9% increase in non-oil exports. This rise was bolstered by a surge in re-exports, which reached SAR 10.2 billion, the highest level for this category since 2017.

The share of oil exports in total exports declined to 72.4% in May from 73% in the same month last year.

Moreover, the value of re-exported goods increased by 33.9% during the same period.