Capital market expert Salah Heidar said Central Bank resorted to increasing interest to support the Egyptian pound and attract more savings to confront liquidity produced to buy debentures and bonds. The government expanded the treasury recently to bridge the deficit of the general budget today November 27. Heidar said fixing the interest price led to erosion, especially in family sector deposits with the raise of inflation. On the contrary, the fixture was due to the budget deficit and the will to encourage investments. That's why he added they believe this increase in interest rates copes with the present phase given and a step to be reconsidered when conditions improve. Heidar pointed out the liquidity at some banks were affected lately with the turnout of treasury bonds purchases. Consequently, they resort to increasing liquidity by increasing the interest price to confront any stress in the upcoming period. The latest data declared banks are in need of providing internal liquidity to confront demands, either governmental or credit facilities, to try and protect deposits. It is also in need to attract some customers through the state of recession the local markets are going through now. Heidar sees one of the most important reasons to raise the interest price is to attract savings from foreigners and change the money later to local currency. This will increase the relative benefit from saving with local currency especially after the decline of the Egyptian pound compared to the U.S. dollar to its least level in years.
