With the aim of achieving monetary stability and reaching a low inflation rate, the Central Bank of Egypt (CBE) decided Thursday to take a number of measures, including shifting from a fixed exchange rate system to a floating exchange rate system.

As per the decision, all banks operating in Egypt will be able to set the exchange rate price of foreign currencies in order to end for good any trading outside the official market, the CBE said in a statement.

The statement comes shortly after the central bank announced floating the Egyptian pound versus the dollar.

The move, the bank statement said, comes in line with the integrated reform plan adopted by the government to enable the national economy stand against existing challenges and increase growth rate in a way that level up to Egypt's abundant human and natural resources. 

Among the other measures, the bank decided to increase interest rate on the overnight deposit rate, overnight lending rate, the rate of the CBE's main operation and credit rate by 300 bps to 14.75 percent, 15.75 percent, 15.25 percent and 15.25 percent respectively.

Banks will be allowed to open their branches till 9 p.m. and during weekly vacations to facilitate currency exchange operations, the statement said.

The bank stressed that no restrictions will be enforced on cash deposits or withdrawals either for individuals or companies.

But the earlier daily limit of 50,000-dollar deposits and 30,000-dollar withdrawals is still in place for companies importing non-basic commodities, the statement said. 
The CBE, in its statement today on the liberalization of the exchange rate, said that the decisions fall within the framework of the large-scale financial and structural reform program that was announced by the Egyptian government to decrease the budget deficit and the public debt.

The program also meant to complete the reform of the subsidy system, rationalize the government expenditures, decrease imports, particularly indiscriminate imports, increase exports, encourage local and foreign investments, as well as implement the Egyptian Supreme Investment Council (SIC)'s recent decisions, the statement said.

The reform program aims at striking a balance between the austerity measures and their impact on limited-income brackets via expanding the overall social protection program and the CBE's commitment to secure foreign currency for importing basic commodities, the statement said. 

The CBE's decisions to freely float the Egyptian pound aim at restoring the circulation of foreign currency at the banking sector and in turn putting an end to the turmoil in the foreign exchange market, which is driven by the supply and demand, and maintaining a stability in the FX market, it added.

The new exchange rate system is part of the reform package meant to reduce the inflation rates and stabilize prices in the medium term, according to the statement.

The Central Bank will closely follow up the application of this system to ensure its effectiveness, the statement said, reassuring the CBE will use all its tools and powers to maintain regularity of foreign exchange markets, liquid money management and price stability in the medium term.

It made it clear that it will not allow any of its affiliates to hinder the application of this new system. 
The Central Bank of Egypt (CBE) urged rendering successful the new mechanism of liberalizing exchange rate for the best interest of the Egyptian economy.

Currency black marketeers are incriminated under the law, the CBE statement said.

As of Sunday, the CBE will operate a hotline for any complaints, especially with regard to hard currency deposits or withdrawals.

It said the Egyptian Banking sector's profits jumped by 55.4 percent in June 2016 in comparison with the corresponding period in 2015.

The net profit stood at EGP 33 billion, the statement said.

The CBE stressed that its policies and decisions were meticulously examined, read the statement.

The statement added that the decisions were meant to help the nation overcome the current crisis and move forward to realize development.

Source: MENA