Egypt

Egypt’s Central Bank said it raised interest rates on Thursday as the embattled Middle Eastern country continues to battle surging inflation and a depreciating currency, the Associated Press reported. In an online statement, the bank’s monetary policy committee said the most basic lending rate, the overnight deposit rate, has increased from 16.25% to 18.25%. The hike aims to ease spiraling inflation, with the annual figure reaching 32.9% in February, up from 26.5% in January.

Traders are on a record-long streak of hedging against a decline in the Egyptian pound as some Wall Street banks warn growing pressures on the currency could soon force the central bank’s hand in allowing another devaluation, Bloomberg News reported. Time may be short for a country facing what Citigroup Inc. said is growing pent-up demand for dollars that won’t ease without more currency flexibility and stronger investment flows. Half measures haven’t been enough, stalling deals and resulting in an underperformance of Egypt’s bonds.

Russia’s invasion of Ukraine, now in its second year, has pushed up food and energy prices worldwide, adding another layer to Egypt’s economic crisis, the Associated Press reported. Soaring inflation, a severely weakened currency and other problems have followed decades of government mismanagement and broader disruptions, starting with the turmoil from the 2011 Arab Spring popular uprising, then years of militant attacks, followed by the coronavirus pandemic and the war in Ukraine.

Egypt looked to raise $1.5 billion through the sale of its first Islamic debt, as the North African nation wrestles with a foreign-currency crunch, Bloomberg News reported. The wheat importer’s $400 billion economy is exposed to the shockwaves of Russia’s invasion of Ukraine. It has devalued its currency three times since March and sought aid from the International Monetary Fund. The final guidance price for the three-year dollar sukuk was at 11.125% area (+/- 1/8th) on Tuesday, according to a term sheet seen by Bloomberg.

Egypt’s monthly food prices soared at the fastest pace on record, sending inflation in urban parts of the country sharply higher in January and adding to the urgency for the central bank to resume interest-rate hikes, Bloomberg News reported. The surge in cost increases was a surprise to many economists even after last month’s steep currency devaluation heaped more pressures on consumers in the Middle East’s most populous nation.

Egypt plans to cut spending after the International Monetary Fund extended hundreds of millions of dollars in an economic bailout package, as the country struggles to pay off debts accumulated from a decadeslong building boom, the Wall Street Journal reported. Authorities said earlier this week they would delay state projects that required significant U.S. dollars to fund and cut back on travel, training and conferences for officials, according to Egypt’s cabinet.

The Egyptian pound fell to yet another record low, a sign that authorities are pressing ahead with a shift to more flexible currency trading, Bloomberg News reported. The currency slumped as much as 14% to 32.1 per dollar before paring losses to close at 29.8 on Wednesday, capping the largest single-day drop since late October. That’s narrowed the gap against prices quoted in the black market, the so-called parallel exchange rate of about 31, according to traders.

Prices for staples such as meat, clothing, travel and medicine have been rising as the Egyptian pound fell 36.5% last year against the U.S. dollar, making it the third-worst-performing currency in the world after the Sri Lankan rupee and the Argentine peso. Inflation hit nearly 19% in November and economists expect it to rise to 25% by March, the Wall Street Journal reported. As prices surged, it became more expensive for the government to import food, sparking hoarding. Government officials have said that bread, rice and cooking oil have been missing from some store shelves.

The Egyptian pound plunged to a record low on Wednesday as authorities navigate the country’s worst foreign-exchange crunch in half a decade, Bloomberg News reported. The currency headed for its biggest slump since a devaluation in October with a slide of as much as 7% to about 26.5 per dollar in the offshore market, before trimming some losses, according to data compiled by Bloomberg. That still leaves the pound stronger than prices offered in the black market. “This is certainly another devaluation,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The International Monetary Fund has approved a deal that will provide a $3 billion support package to cash-strapped Egypt over a period of almost four years, with the agreement expected to draw in an additional $14 billion in financing for the Middle East country, the Associated Press reported. The announcement from the IMF’s executive board late on Friday comes after a preliminary agreement was reached in October between Egypt and the fund.