Exchange rate flexibility has become a normal and healthy thing and we should not repeat the mistakes of the past
Commercial International Bank Egypt CEO Hisham Ezz Al-Arab believes that inflation in Egypt will decrease in the second quarter of next year. This drop could allow the central bank to lower interest rates to around 7% by 2025, down from the current rate of about 27.25%.
During a discussion on the “Al-Hekaya” program on MBC Egypt, Al-Arab highlighted that the International Monetary Fund is focused on the private sector’s role in Egypt’s economy. He noted that the current system allocates 70% of resources to the public sector and 30% to the private sector. He emphasized that the private sector contributes more in terms of tax payments.
Al-Arab also pointed out the increase in the dollar’s value against other currencies following the recent US election. He stated that this trend is part of a global movement and confirmed that Egypt’s local currency policy aims for flexibility. He stressed that this approach will help avoid past issues where the local currency was overvalued.
What are the main challenges facing the Egyptian economy as discussed by Hisham Ezz Al-Arab in the interview?
Interview with Hisham Ezz Al-Arab, CEO of Commercial International Bank Egypt
Interviewer: Thank you for joining us today, Mr. Al-Arab. Let’s dive into your perspective on inflation in Egypt. You mentioned in your recent appearance on “Al-Hekaya” that you expect inflation to decrease in the second quarter of next year. Could you elaborate on the factors that might contribute to this decline?
Hisham Ezz Al-Arab: Certainly. We are seeing various economic indicators suggest that inflationary pressures may ease in the coming months. External factors, such as the stability of global markets and relative commodity prices, play a crucial role. Additionally, if the government manages to streamline economic resources and enhance productivity in both public and private sectors, we could witness a reduction in inflation rates.
Interviewer: Interesting. If inflation were to decline, how do you anticipate the Central Bank of Egypt responding in terms of interest rates?
Hisham Ezz Al-Arab: If we see a consistent decrease in inflation, it would provide the Central Bank with the opportunity to lower interest rates significantly, potentially bringing them down to around 7% by 2025 from the current rate of approximately 27.25%. This would not only stimulate borrowing but also boost economic activity by making financing more accessible for businesses and consumers.
Interviewer: You also discussed the International Monetary Fund’s emphasis on the private sector’s role in Egypt’s economy. Can you explain the current resource allocation and its implications for future growth?
Hisham Ezz Al-Arab: Currently, the allocation is skewed with about 70% of resources directed towards the public sector and only 30% towards the private sector. The private sector is critical as it generates more tax revenue and drives innovation. If we can shift this equilibrium and empower the private sector, we can stimulate growth and increase overall economic contributions, which is vital for our progress.
Interviewer: Regarding currency fluctuations, you noted the rise in the dollar’s value after the recent US elections. How does this impact Egypt’s currency policy?
Hisham Ezz Al-Arab: The dollar’s appreciation is indeed part of a broader global trend. In Egypt, we aim for a flexible currency policy that can swiftly adapt to such changes, avoiding situations where the local currency becomes overvalued. A flexible approach allows us to manage market conditions more effectively, aligning with international trends while safeguarding our economic integrity.
Interviewer: Lastly, the recent surge in dollar selling you mentioned indicates market volatility. What are your thoughts on the stability of the Egyptian market in response to these fluctuations?
Hisham Ezz Al-Arab: Market fluctuations are natural, and the recent dynamics we’ve observed, including the dollar reaching around 49 pounds and 91 piastres, reflect typical behaviors seen in many other markets. I am confident that these responses are manageable and within the scope of normal market operations. Our focus remains on maintaining stability and reassuring investors.
Interviewer: Thank you for your insights, Mr. Al-Arab. Your perspective on inflation, interest rates, and the currency landscape in Egypt is invaluable to our audience.
Hisham Ezz Al-Arab: Thank you for having me. It’s crucial to keep the dialog open as we navigate through these economic challenges together.
He explained that the dollar’s recent behavior in the Egyptian market aligns with trends seen in other countries. Last week, the dollar reached a rate of 49 pounds and 91 piastres. However, there was a subsequent surge in dollar selling, indicating normal market fluctuations. Al-Arab expressed confidence that the market responses are typical and manageable.