Patrick Werr

CAIRO (Reuters – Egypt’s two largest state banks, have sold 303bn Egyptian Pounds (£16.57 billion) of special certificates of deposits (CDs), which they launched last week with a yield 18%.

Banque Misr and National Bank of Egypt sold one-year CDs to absorb excess liquidity and to dampen inflation. The central bank had allowed the Egyptian pound’s slide of about 14% to the dollar March 21st, economists stated.

Since November 2020, most of the exchange rate had remained constant against the dollar.

Egypt was selling high-yield Egyptian Pound Treasury bills to foreign investors before the devaluation.

The central bank was offering local banks short-term deposits through open market operations in an effort to increase foreign demand.

They had increased by 360 billion Egyptian Pounds since October and were now at 985.35 Billion pounds as March 1.

Bankers and economists stated that investors pulled billions out of Egyptian Treasurys due to concerns over an increase in U.S. Interest rates.

In recent weeks the central banks began to reduce the size of its open market operations. According to central bank data, this move has infused around 250 billion pounds into our economy since March 1. All of that has been absorbed by the new CDs.

Bankers say this comes at a high price. Central bank data shows that the CD yield is 18%, compared to an average yield 13.395% from one-year Treasury bills sold to banks in an auction held on Thursday.

($1 = 18.2900 Egyptian pounds)