After Egypt’s two biggest state banks released the platinum certificates, some forecasts have been circulating regarding yet another rise in bank interests.
Last month, the Egyptian market witnessed the release of new saving certificates for the Egyptian pound with an interest rate of 12.5 percent; the certificates were released by Bank Misr and the National Bank of Egypt. The return of the three years certificates is granted consistently throughout the entire period of certificates. Its categories start from EGP1,000 and its multiples are issued to individuals. The certificates can be used as guarantees in case customers want to obtain a loan through easy terms.
An Egyptian state bank official claimed:”Another rise in bank interest rates might happen again.” “We are keen to maximise the benefits delivered to our customers and we are working for the benefit of the Egyptian citizen; we believe that the decision that was already taken, releasing the 12.5 certificates supports the national currency because it encourages the customer to buy certificates with the Egyptian pound.” He added On the other hand, a Cairo based banker stated that a raise of bank interest might happen again: “The interest rate could exceed the 12.5,” he added. Concerned with the rise in bank certificates interest rates, he argues that this raise indicates that the Egyptian government is in need of cash liquidity.
He added that the Egyptian economy is facing a crisis and needs projects with immediate cash revenues, actually many of the projects being held are projects with long term cash revenues, such as the New Suez Canal project. He also pointed out that raising the interest rate of banks certificates will limit investment opportunities; because consequently banks will lend loans to investors at higher interest rates which may discourage potential clients to put cash in investments.
Concerning the issue of investment the state bank official argued that banks have diversified saving account with different rates, for example, the interest rate of saving accounts in state banks ranges around six per cent , and this diversity keeps a balance within the market as it do not have a negative effect on investment opportunities . Furthermore, this raise of interest for with the Egyptian pound supports the currency and might encourage more national projects to be implemented.
He also said that Egypt needs more national projects, particularly within the manufacturing field, and if this step was accomplished it will consequently limit Egyptian imports and increase local markets exports, to support the national currency. “Another important point, is that the economy in Egypt has been circulating in certain hands for almost 50 years, so encouraging national projects by supporting the pound will help in diversifying investors who enter the Egyptian market”. He concluded Latest reports indicate that the 12.5 certificates collected around EGP 40bn, expected to increase if interest rates witness another raise.
