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Float EGP .. long-awaited step amid concerns over price and debt


In a move that is long overdue, according to the investment banks, the central bank's decision to float the Egyptian pound exchange rate amid welcome from analysts and research centers came.

In a poll conducted by the "live" for a number of analysts, Gather a positive resolution, with expectations of an increase of public debt burdens, and rising prices of strategic goods, and the rise of the inflation rate.

She said Capital Economics Research, said that the central bank's decision liberalization of the exchange rate would lead to "short-term pain" in Egypt, with expectations of higher inflation.

The central bank decided today, freeing the exchange rate, and leave it to the mechanisms of supply and demand, while the dollar rose against the pound to the level of 13.5 for sale in banks.

And Research Foundation announced through a memorandum issued on Thursday, that the liberalization of the exchange rate is likely to raise the rate of inflation in Egypt by up to 6% over the next three months, with the arrival of the local currency to the level of 13 pounds per dollar in banks.

He says Chairman Twain Capital Investment, said that the central decisions today, as well as the Supreme Council for investment decisions, on Tuesday, is considered "very important", especially with investors feeling of economic stability, and paralysis in the investment climate.

Supreme Investment Council 17, a decision was taken at its first meeting after its formation, which included agricultural and new industrial investment in the level of tax on profits exemption for a period of five years from the date of receipt of the land, and exemption for five years for new projects to manufacture products of strategic goods that are imported from abroad or directed or for export abroad.

He adds Mustafa Adil, there are comfortable with the decisions; because it is stagnant investment and economic indicators atmosphere, which will lead to a natural reduction of the medium and long term for the dollar against the pound to less than the current balanced pricing move, which opens the door to get out of the state of economic paralysis for over 3 years.

Just and warned of the loss-making significance, and the shift to a negative tool stressful on the economy if the state did not benefit its momentum, and has worked to be activated quickly.

He continues, Prime Twain Capital Investment: "Yes, we will face a very difficult days and if the application of those financial and economic policies properly we will see a strong economic situation and the fact the growth rates of more than 8%, and a gradual reduction accompanied by inflation which is in raising the general income of individuals in Egypt."

He concludes: "Decisions are important and sound and on track of economic logic, and the results achieved only if we took the steps associated with implementing a more rational."

The past period increased speculation about a float valuable or reduce the value of the pound, after rising dollar on the black market to record levels.

He says macroeconomic analyst at Pharos Holding, said that the central decisions was unexpected and came at an appropriate timing gap with the decline in the dollar between the official and parallel markets during the past two days.

He adds Rami Arabi, that the central decision despite appropriate timing, but it is long overdue.

Arabi explains that a positive decision to raise interest rates, and the impact on the decline in inflation, and it appears that in the period between 4 to 6 months.

He continues Arabi: "making a positive investment, but it is necessary to solve the remaining problems and the elimination of corruption and bureaucracy and promote exports."

Rami Arabi adds: "The most important in the decision to leave without price ratios to fall and rise and achieve greater flexibility."

Arabi concludes: "it is left to the final approval of the IMF loan only reduce fuel subsidies."

Egypt succeeded in reaching an agreement with the International Monetary Fund on access to $ 12 billion over three years.

The head of the research department at the Arab Online Securities, said the decision positive, but it raises the debt burden on the government, and raise commodity prices.

He adds Hisham Shebini, the government hedged than that announced by the Central Bank to provide $ 1.8 billion to bring inventories in strategic goods for a period of six months, to control inflation expected after the decision.

He continues Shebini: "the origin of the problem is that Egypt has a food gap of around 60% are imported from abroad, reaching import bill to about $ 90 billion compared with exports of $ 18 billion annually, and must reduce the import to curb demand for hard currency, and in parallel with the launch of domestic production to provide basic goods.

He says: "We must find lasting solutions to the crisis of the currency shortage, which scaled back imports and tourism and remittances from Egyptians abroad and increase foreign direct investment."

He says Prime Bank Research, said that the decision of the flotation step is long overdue, and higher-than-forecast 11 to 12.5 pounds to the dollar.

She added that the decision to float and not only cut a positive step to attract conservative and foreign direct investment, and the return of private transfers that leaked from the banking sector, against the backdrop of a widening gap in the exchange rates between the official and parallel markets.

She explained Primes, in a research note Thursday that the hike is justified to increase the competitiveness of the Egyptian market to attract short-term foreign investment, especially with the increase in the US central bank forecast to raise interest with the end of the year, but the recent rise in interest rates by about 300 points basis exceeded the previous forecast at 200 basis points.
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