Dollar Surpasses 27 EGP Mark, Egyptian Stock Market Hits Record Highs Amid Currency Decline

Egypt - Ekhbary News Agency

Egyptian Pound Continues to Weaken, Dollar Exceeds 27 EGP

The Egyptian pound further depreciated against the US dollar and other foreign currencies on Thursday, with the dollar reaching 27.07 EGP for purchase and 27.16 EGP for sale, according to the Central Bank of Egypt (CBE). This decline follows the CBE's adoption of a sustainable flexible exchange rate system in coordination with the International Monetary Fund (IMF), aiming to eliminate the parallel dollar market.

Egyptian Stock Market Achieves Historic Milestones

In contrast, the depreciation of the local currency has positively impacted the performance of the Egyptian stock market, which has recorded unprecedented historical levels. The market capitalization surpassed one trillion Egyptian pounds for the first time in its history, reaching 1.013 trillion EGP during Wednesday's trading session, exceeding its previous highest level of 1.008 trillion EGP in April 2018. The stock exchange also witnessed a surge in executed trades, exceeding 115,000 operations, a new record.

New Savings Certificates and Exchange Rate Flexibility

Major state-owned banks, Banque Misr and the National Bank of Egypt (NBE), have launched new one-year savings certificates offering a 25% return at maturity or a 22.5% monthly return, effective January 4th. These certificates aim to attract citizens' savings, particularly dollar holders, and convert them into Egyptian pounds, thereby providing dollar liquidity.

Expert Analysis: A Logical and Expected Decision

Aya Zehir, Head of Research at Zilla Capital for Financial Consultations, attributed the pound's depreciation to the CBE's adoption of a sustainable flexible exchange rate system, deeming it a logical and expected decision to eliminate the parallel market. She added that the high-yield savings certificates are intended to attract savings and curb expected inflation, in addition to the potential for gradual adjustments in petroleum product prices and an increase in interest rates.

Zehir anticipates that the "fair value" for the dollar will range between 25 and 28 EGP, emphasizing the need for the CBE to ensure dollar liquidity following the cancellation of the documentary credit system for import financing.

Impact of Certificates on Economy and Future Outlook

Wael Enaba, a capital market expert, downplayed the short-term impact of the high-yield savings certificates on the stock market's performance, explaining that they are designed to attract dollar liquidity from holders and speculators. He highlighted the importance of allowing foreigners to purchase these certificates to attract more dollars, especially since their returns are tax-exempt.

Enaba predicted that the NBE and Banque Misr would halt the issuance of these certificates within two to three weeks at most, after successfully attracting their targeted proceeds. Egypt's net international reserves also rose to $34 billion by the end of December 2022.