CBE keeps interest rates on hold THE CENTRAL Bank of Egypt's (CBE) Monetary Policy Committee (MPC) has decided to keep the overnight deposit rate and overnight lending rate unchanged at 8.25 per cent and 9.75 per cent respectively. The bank has been keeping its rates at this level since September 2009. The move aims at supporting the economy that shrank by 4.2 per cent in the quarter that ended in March and investment plunged 26 per cent. Beltone Financial, a leading investment bank, praised the move saying that raising interest rates would not contain inflationary pressures, as inflation in Egypt continues to be led by food prices, with no signs of non-food inherent inflationary pressures building up. The annual inflation rate in urban parts of Egypt declined in June to 11.8 from about 11.9 per cent in May as food prices rose at a slower pace. "Current inflationary pressures are in tandem with rising global food prices and existing structural bottlenecks in the economy, with any changes in rates having a marginal, if any, impact on containing inflation. As efforts continue to balance between growth, inflation and downward pressure on the EGP, this leaves the CBE with limited room for a policy rate change," said a Beltone note. Eastern profits smouldered NET profits of Eastern Tobacco, Egypt's sole tobacco producer, declined 26 per cent in fiscal year 2010/2011 to LE631 million on sales of LE4.353 billion, which is 1.8 per cent higher than the previous year's sales. The marginal growth in sales is normal given that production halted for a week in late January and early February, due to the revolution. The retreat in profits is attributed by CI Capital to lower top line, higher interest expense and weak provisions. CI Capital expected in February that the company will not be able to restore its 2009/2010 high results for two quarters due to the high lease expense and the increasing tobacco prices. No compensations for gas supply interruptions THE EGYPTIAN government would not pay any compensation to countries receiving gas supplies through the Arish pipeline after supplies were interrupted due to another attack on 4 July, local press quoted Minister of Petroleum Abdallah Ghorab as saying. Meanwhile, Ghorab said that the ministry is trying to reach a settlement with gas-importing countries through the pipeline (mainly Jordan and Israel) without having to resort to international arbitration. According to Beltone, East Mediterranean Gas Company, the Egyptian-Israeli company responsible for exporting gas to Israel, sent official letters to the Foreign Ministry and other governmental bodies asking to avoid resorting to international arbitration to settle investment disputes, which include the payment of $8 billion in compensation for the interruption in gas supplies. LE3 billion bonds on the bloc THE FINANCE Ministry offered earlier this week LE3 billion in two-year bonds maturing on 26 July 2013. The issue is the first since the uprising of 25 January. Since early February, Egypt has relied on treasury bills with a maximum maturity of one year for its borrowing needs. According to a Reuters estimate, the government needs to sell LE50-55 billion in securities each month to roll over existing debt. Reuters put the value of treasury bills sold in May at LE48 billion compared to LE40 billion in June and LE25.5 billion so far in July.
