Egypt’s central bank reacts
With rumors surrounding the market claiming that some Egyptians have withdrawn their funds from banks out of concern they would be frozen by the authorities, Egypt’s central bank has taken steps to safeguard deposits in local and foreign currencies in Egyptian banks in response to the rumors.
In a press release to address the situation, the bank stated that “The Central Bank of Egypt is taking all necessary steps and measures to preserve the stability and security of the banking sector in Egypt and depositor funds.” The bank also announced that the maximum yield at an auction of 500 million Egyptian pounds ($81 million) of five-year bonds edged up to 14.37% on Monday from 14.25% two weeks earlier. The bonds are sold on behalf of the finance ministry. Analyst link the rise of rates to the high economic and political risks involved. The yield on the five-year bonds, which mature on November 13, 2017, ranged from to 13.90% to 14.37% compared to 14.00 to 14.25% at an auction on December 10.
However the country’s long-term credit rating has been cut by the Standard & Poors’ and it’s threatening further cuts if deepening political turbulence undermines efforts to prop up the economy and public finances. Egypt’s long term sovereign rating is rated as a ‘B-’ from ‘B’. Its short-term rating still stands at ‘B’. A statement released by the rating firm warned that a “if a significant worsening of the domestic political situation results in a sharp deterioration of economic indicators such as foreign exchange reserves or the government’s deficit,” another cut could be made.
Egypt’s economic and financial situation is still in limbo and tensions between political factions might not be over yet as we elections get closer again.