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00:00 Welcome. The Central Bank's Monetary Policy Committee has decided in an exceptional meeting today to raise interest rates on the two returns of the loan and the loan for one night.
00:14 The main operation of the Central Bank is now at 600 points.
00:18 Interest rates on the return have been recorded at 27.25% and the loan at 28.25%. Thus, the Central Bank has raised interest rates since the beginning of 2024 by 8%.
00:32 We are joined by Mr. Mohamed Abdel-Aal, the financial expert, from Cairo. Mr. Mohamed, welcome to our show and thank you for being here. Why do you think the Central Bank has made this sudden decision at this time?
00:50 And were the demands of the credit box what encouraged the process of raising interest rates in your opinion?
00:58 Of course, one of the demands of the credit box, which is in line with the monetary policy of the Central Bank, which aims to expand,
01:10 the main goal of the Central Bank in its monetary policy in the coming period is to limit the monetary potential of inflation to increase in very large amounts as a result of foreign sanctions and the sanctions on the loan, etc.
01:28 Therefore, the main and most important goal is to eliminate inflation and send it to its target funds at the end of 2024, which is 7% plus or minus 2%.
01:42 This requires a very strict monetary policy. The Central Bank's monetary policy was reflected in the decision made this morning to raise interest rates by 600 points.
01:58 This is a historical figure. If we add 2% in February, the previous meeting, it will be 8%. I think its impact will be very strong on the inflation rate,
02:13 because of course it will have a direct impact on the limitation of interest, but the limitation of interest is at the current stage.
02:20 It will affect the growth, but the strategic goal now, first, whether by the Central Bank or by the demand of the credit box, is to limit inflation.
02:35 Yes, but ...
02:36 As for the other sector ...
02:37 Go ahead. The other sector ...
02:40 The other sector, which is very important and complements the monetary policy in the high-price sector, also speaks on the exchange rate.
02:52 Of course, the Central Bank has reached the farthest it could have expected, which is to leave the Egyptian pound free of market incentives.
03:01 This is the best measure we could have expected in managing the exchange rate, to be left as it is, and therefore, the governor will continue to push foreign money from all sides at a unified price,
03:22 to achieve the interests of all investors in the market, whether directly or indirectly.
03:31 Mr. Mohamed, we are now entering the seventh time in the inflation process, since we left the process of setting the exchange rate according to the market mechanisms.
03:40 Does this mean that this may be the last time for the inflation process for the Egyptian central bank?
03:48 Honestly, I think so, and in all my previous comments or writings, I used to reject the idea of financing or moving in any form,
04:01 unless there is a strong financial push to support the Egyptian pound and guarantee the flow of foreign currency in exchange for the market needs of all those involved.
04:18 We were even confident of $18 billion from the Central Bank, but after the market reacted to the deal of the Supreme Council and 35 billion dollars of direct foreign investment were available,
04:35 it did not reach Egypt's path more than a year ago, and the $10 billion of direct foreign investment saved a lot of money and a strong push.
04:47 This is an opportunity for the Egyptian economy to start supporting the Egyptian pound with full support,
04:55 to ensure the absorption of the shocks we are facing, to ensure control over the market, to ensure the unification of the exchange rate.
05:05 Now, I imagine that the balance market will disappear, the opposition will disappear, and the tabula rasa will disappear,
05:14 and the transfers of the workers abroad will begin, and the direct foreign investment will return as a result of the increase in the interest rate,
05:23 in addition to the stability and flexibility of the interest rate.
05:27 The Egyptian-based institutions will also begin to improve the future perspective, from a negative one to a positive one, etc.
05:36 The direct foreign investment will also increase, and the program of the European Union will also be expanded.
05:43 Today, Mr. Mohamed, we will see the banks' approach to issuing high-interest certificates, perhaps after this step from the Central Bank,
05:53 because we are talking about higher certificates, perhaps above 27%.
05:57 Do we need to issue higher-interest certificates during this phase?
06:02 Indeed, the completion of this system is a very important decision, meaning the system of increasing the interest rate,
06:10 and the free and open financing of the Egyptian banks will have some measures.
06:15 One is that the Central Bank, and I think that other banks will follow suit, especially the King of Egypt and the Cairo Bank,
06:22 will issue a new deposit for three years, the first year at 20%, and then the decrease will begin.
06:29 This at least brings a large surplus of liquidity in the hands of people,
06:37 the M1 and M2, and the amount of funds to be deposited, so that the demand for inflation does not increase,
06:43 and it will help to reduce inflation in the coming period.
06:47 The second decision, which is very important, and the main instructions of the Prime Minister,
06:52 is to increase the rate of inflation and to follow the rate of inflation of the accumulated goods in the currency.
07:00 This is a very important point, because the increase in the supply of main goods and production facilities
07:08 is very important in reducing prices and making citizens feel the value of these loans.
07:17 The integration of the interest rate with the increase in the interest rate today, with the rate of inflation,
07:23 I consider it a day that we should all celebrate in such an important way.
07:30 But the question remains, is 600 a starting point, in your opinion, will be the last in 2024?
07:38 Look, I don't think it will be the last.
07:43 We are invited to give 600 points to both, 800 points on inflation and its approach and goals in the period.
07:53 But the central bank should build the map of inflation as a strategic goal,
08:01 as it is stated in the statement, that it should follow a very strict inflation rate, and there are other opportunities.
08:10 Thank you, Mr. Mohamed Abdel-Ala, the financial expert. You were with us from Cairo.
08:15 But now Mr. Mohamed Al-Atrabi, the president of the Egyptian Bank, joins us about this decision of the central bank to raise interest rates.
08:26 Mr. Mohamed, welcome to us on the Arabian CNBC screen.
08:29 Let me hear your opinion at the beginning of this exceptional and surprising meeting for the central bank at this time. Please.
08:37 First of all, I welcome you. Of course, this decision is a decision in its place.
08:44 Of course, because the central bank is targeting the slaughter of inflation, it raised the prices of the corridor by 6%,
08:52 then 28.25, 27.25. We issued a negative certificate today, because we see that, God willing,
09:00 in the near future, inflation will decrease annually. We issued 30% of the annual interest rate,
09:08 and 25% for the second year, and 20% for the third year. This is a negative certificate, but it is a negative one,
09:14 because it is expected that, God willing, after the decisions of the central bank and the tariff raising,
09:20 the losses will decrease, the market will disappear, inflation will decrease, and we will be able to meet the demands of the customers.
09:26 This is a decision in its place, and this is confidence in the central bank and the Egyptian slaughter market.
09:33 How much do we expect the new certificates and new certificates, Mr. Mohamed, to attract customers this time compared to the previous certificates?
09:41 And how much of the certificates you have attracted, or the bank has issued recently?
09:48 We issued the annual certificate, which is only one year, and it was 27% annual interest rate,
09:58 or 23.5% monthly interest rate, and this attracted about 300 billion pounds.
10:03 We expect, God willing, that there will be a very strong retention of the negative 30%-25%-20% certificate,
10:12 and there is a cycle, which we have done, which gives annual interest, every three months, and every month, depending on the customer's choice.
10:19 I expect that it will attract a very large number of customers, God willing.
10:26 We expect an extension of its duration, Mr. Mohamed, for this certificate, according to the market situation, or is it only for one time?
10:35 No, it is still available today, and it will continue for a while, but we have not finished it yet.
10:45 On the other hand, how much do we expect there will be an effect on the increase in the interest rate on the amount of loans from the bank?
10:53 Of course, the loan is related to the price of the corridor, so of course the prices will rise,
11:01 but it is a temporary period, and the prices will go down again with the return of the inflationary economy.
11:07 The market will lower the corridor, and we saw this in 2016, God willing.
11:13 I expect, after the recent financial analysis and the decision of the bank today,
11:20 and the financial analysis and the increase in interest, that the income will enter the banking sector,
11:25 and this will show its potential, and the direct market will disappear completely, God willing.
11:30 On the other hand, how much will we see an increase in the amount of deposits you have, Mr. Mohamed, on the account of the loan rate?
11:37 Of course, the loan rate for loans is between 47 and 48 percent.
11:47 This percentage may rise more, and the interest rate for deposits will drop by 3 percent, depending on the acceptance of the loan.
12:04 This percentage is always in the range of 40 to 50 percent, and this is the average of the entire banking sector in Egypt.
12:15 The average of the banking sector does not exceed 50 percent for loans.
12:21 Today, we consider this step to compensate all or part of the central bank, in your opinion,
12:27 since we left the exchange rate according to the mechanisms of the market today?
12:32 This is the market's priorities that I will talk about.
12:36 I expect that the exchange rate will disappear, and the income will return to the banking sector.
12:43 This is the beginning of the problem.
12:45 Today, there are institutions that have started selling dollars as soon as the Egyptian pounds were compensated.
12:52 This is evidence that we are moving in the right direction, and God willing, I expect the end of the distribution market.
13:02 The banking sector will receive the transfers made abroad.
13:07 Of course, those who have dollars or bought dollars at high prices, today they regret this step.
13:16 But we are talking about the banking sector, and banks will start to meet the demands of customers,
13:23 and therefore the distribution market will not be present.
13:26 Because if the bank meets your demands, you do not need to go to the distribution market to buy at higher prices.
13:31 But will you meet the demands of national projects in a larger way now,
13:34 since we can consider it a break that has begun to happen in the Egyptian economy?
13:39 Mr. Mohamed, how much will the bank provide for the major government projects?
13:46 The government said that there will be priorities for projects.
13:53 Of course, in order to maintain our foreign currency resources, there will be requirements.
14:01 So we will not see the Egyptian Bank presenting funding for these projects during this period?
14:09 If the project is good and has good promises, the Egyptian Bank will provide funding.
14:16 It will provide funding for national or non-national projects.
14:19 In the end, the bank looks at the profitable rates and the project promises.
14:24 I will not fund a project regardless of whether it is national or non-national.
14:29 The bank will lose in the end.
14:32 This is what we always do.
14:35 The government said that there will be priorities for projects.
14:40 The projects that have begun will end, but there will be a pause for projects that will begin again
14:47 in order to maintain our foreign currency resources.
14:51 We thank you, Mr. Mohamed Al-Atrabi, President of the Egyptian Bank.
14:55 You were with us via phone from Cairo. Thank you very much.
15:00 This was a deep segment.
15:05 We dedicated it to talk about the latest developments and sudden decisions from the Central Bank
15:10 to raise the interest rates by 6% in Egypt.
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