EUR 46.18 For Business Accounts Only

FLOATATION AND HIKING RATES COMBINED EFFECT ON VALUATION

​Finally the floatation is on air, with a positive effect on the Macro level and a dual effect on the Micro level We believe the CBE’s recent decisions to adopt a Floating FX regime, which will succeed in creating an unified exchange rate in the Egyptian market, will be a growth driver for the Egyptian economy, especially that; the decision follows the announcement of investment motivating decisions by the “Supreme Investment Council“. Over the past period, we insisted on the importance of taking the floatation decision as a part of a comprehensive package to incentivize FX sources. After the floatation, the availability of FX is currently the matter. We believe, the new mechanism will succeed in attracting FX circulated outside the banking system, eliminating the black market over a short time period. And hence, the availability would benefit the whole economy. On the other side, the new and high exchange rate would have a dual effect on micro level. A) exporters would benefit from the new rate, translating their revenues to higher EGP value, b) importers of essential goods, who were able to source FX from banks would be negatively affected by the new exchange rate, and c) importers of other goods, who resorted to the parallel market would benefit from the continuity of FX rate at levels below that of the parallel market, which hit EGP 18/USD in the past few days.