Dr. Alaa Ezz, Secretary-General of the Chambers of Commerce, stated that setting a fair exchange rate for the Egyptian pound based on supply and demand mechanisms will ultimately eliminate the black market and lead to further reduction in current circulating prices, causing significant losses for speculators and currency traders.
He added that this important reform in monetary policies, which we have advocated for some time, must be integrated with many urgent reform measures, especially regarding financial, investment, and trade reforms, temporary reduction in government spending along with increased social protection mechanisms, as well as the cancellation of all Central Bank decisions since February 2022, to achieve the economic renaissance led by the President in full partnership between the government and the private sector, ultimately leading to prosperity for all Egyptians.
Regarding its impact on markets, he stated that the new developments will lead to a significant gradual reduction in prices of goods that were based on exaggerated currency rates, which has already begun with certain goods such as cooking oil seeing a 20% decrease. Additionally, the abundance that will be achieved will lead to competition between different brands, local and imported, resulting in further price reductions.
Firstly: We expect an immediate influx of the massive amount of foreign investors who have completed their studies and investment procedures in Egypt and then froze them awaiting this important step, which will lead to a significant surge in foreign direct investment in the coming months. This also applies to the bond offerings program, which we expect to launch rapidly now.
Secondly: With the 6% interest rate hike once, we expect the gradual return of hot money once again, which will increase the dollar inflow and lead to further reductions in foreign currency rates.
Thirdly: We expect a gradual increase in foreign investments in Egyptian international bonds and an increase in their value.
Fourthly: This significant interest rate hike will lead to the issuance of high-interest Egyptian pound bonds that will attract a large portion of the large liquidity currently in the Egyptian market, especially those resulting from previous bonds that have only been partially renewed, and this will immediately curb inflation rates.
Fifthly: This significant interest rate hike will temporarily have a negative impact on domestic investment, but with the subsequent gradual reduction in interest rates, domestic investments will return to their normal levels.
Sixthly: This measure will lead to the development of exports, starting with the availability of raw materials for all sectors following the directives of His Excellency the President to release all arrears at the ports, which will increase with the reduction in the cost of the foreign component in local industry at the fair price, a proportion of which has already decreased with the Ministry of Trade and Industry's plan to support investment in feeding industries.
Now, it is up to business organizations to professionally promote investments and export development after this important reform step, as well as their members from the private sector to work to their full potential to achieve abundance, reduce prices, and develop exports to keep the economy turning and create job opportunities for the sons and daughters of Egypt.
Dr. Alaa Ezz, Secretary-General of the Chambers of Commerce | File
