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.
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North Africa/Middle East
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.
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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.
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A U.S. court of appeals determined this week that cases against Lebanese commercial banks can be tried outside Lebanon, according to a decision seen by Reuters, paving the way for more cases by depositors seeking to unlock their frozen funds, Reuters reported. The court decision, issued on Dec. 15 in a case brought by Lebanese depositors against leading lender Bank Audi, overturned a lower district court's decision that said Beirut courts had "exclusive jurisdiction" to try cases against Lebanese banks.
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The head of Israel's powerful parliamentary finance committee submitted a bill on Monday that would limit banks' ability to raise mortgage rates after central bank interest rate increases, Reuters reported. The Bank of Israel has raised its benchmark interest rate by 3.15 percentage points to 3.25% since April, with more hikes likely. Monthly mortgage repayments have soared by more than 1,000 shekels ($291), with high inflation an additional factor.
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Egypt is expecting approval of a new $3 billion Extended Fund Facility package from the International Monetary Fund next week, Deputy Finance Minister Ahmed Kouchouk said on Wednesday, Reuters reported. Egypt's finances remain fragile despite two major currency devaluations this year and the IMF package, which was announced in October as Egypt pledged to shift to "durable exchange rate flexibility" in line with long-standing IMF demands.
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Saudi Arabia’s central bank has stepped up the use of a mechanism to pump money into the financial system as it looks to tackle a liquidity crunch that has helped push borrowing costs for lenders to the highest in decades, Bloomberg News reported. The latest intervention is relying on open market operations, the people said, transactions that allow the central bank to provide or drain short-term liquidity in exchange for securities from lenders. Unusually for a period of high oil prices, Saudi banks are facing a shortage of liquidity.
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Bank of Israel Governor Amir Yaron on Tuesday warned lawmakers not to interfere with monetary policy decisions, and said the "magic solutions" they proposed to blunt the impact of interest rate hikes would hurt the weakest sectors of the economy, Reuters reported. Yaron's comments appeared to be a response to the head of the Israeli parliament's powerful finance committee, Moshe Gafni, who on Monday criticised a wave of central bank interest hikes and proposed legislation to shield mortgages from rate increases.
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The Bank of Israel is still in the process of front-loading interest rates and will likely raise rates to above 3.5%, Deputy Governor Andrew Abir said on Monday after a half-point rate increase to 2.75%, Reuters reported. Abir told Reuters that the central bank preferred "to err on the side of making sure we get inflation down" with its monetary policy. That means, he said, that the benchmark rate would likely go above the bank's own economists' forecast of 3.5%.
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Yemen’s internationally recognized government is on the verge of bankruptcy after Houthi attacks on oil facilities in southern Yemen halted all oil exports, and it may not be able to pay public employees in areas under its control in the near future, officials have warned, Yemenonline.com reported. A government source told Arab News public employees in liberated provinces might not receive their salaries in the coming months, adding that the country could experience severe fuel shortages and protracted power outages as a result of attacks forcing the government to stop importing fuel.