Egypt's central bank aims to achieve single-digit inflation rate in coming period

CAIRO - 6 March 2024: The Central Bank of Egypt (CBE) aims to achieve a single-digit inflation rate in the upcoming period, the CBE Governor said in a press conference held today addressing the nation and outlining the government's firm commitment to combating inflation and stabilizing the Egyptian economy. 

 

Governor Hassan Abdalla emphasized the severity of inflation as the most pressing challenge faced by any economy. He highlighted the detrimental effects of maintaining dual exchange rates, which lead to instability. Abdalla reassured the public that the CBE is determined to take necessary measures to curb inflation, expressing confidence that these steps would yield positive results for Egyptian citizens.

 

Abdalla further explained that the 600-basis points interest rate hike aims to contain inflation, expedite its downward trajectory, and achieve the targeted inflation rates. He emphasized that the central bank is shifting its focus from a particular exchange rate to a specific inflation rate, underlining the importance of price stability.

 

“The central bank is no longer targeting a certain exchange rate, only targeting a certain inflation rate," Hassan Abdalla added in the press conference.

 

Governor Abdalla expressed gratitude for the unwavering support received from the political leadership and affirmed the government's commitment to economic reforms. He stated that the initiatives undertaken thus far are just the beginning, and there is still more work to be done. Abdalla also assured the public that Egypt currently possesses sufficient reserves to meet its dollar obligations and has surplus funds available.

 

Deputy Governor Rami Abu El Naga highlighted the CBE's mission to safeguard the stability of banking sector financial centers, during the press conference. Abu El Naga emphasized that the CBE conducts rigorous tests to evaluate the impact of various factors on the position of banks.

 

Abu El Naga also provided insights into the current state of the banking sector, revealing that the loan-to-deposit ratio has reached 54 percent and that banks' allocations for irregular customers have reached 92 percent. He further disclosed that Egypt's rate of return on assets stands at 1.2 percent.

 

In terms of expats’ remittances, Deputy Governor Abu El Naga acknowledged that the banking sector has experienced significant losses in remittances from Egyptian expatriates due to activity in the parallel market. He expressed optimism that these inflows would recover as the market stabilizes. He stressed that the decisions made by the CBE aim to restore confidence in the Egyptian economy.

 

Governor Abdalla concluded the press conference by explaining that the decision to increase interest rates is intended to incentivize holding the Egyptian pound for citizens, thereby supporting the local currency and bolstering economic stability.