Uncertainty
Business is all about uncertainty, a positive form of uncertainty where potential, opportunity and innovations around every corner would take economies places and make a huge leap towards the future of humanity. And with this uncertainty come some acceptable risks and threats that add to the thrill but also add to the magnitude of opportunity; an easy target is never valuable.
This healthy uncertainty is usually on the micro-level and is often internal to the company, firm or team. What could kill this positive uncertainty is an unknown non-measurable unpredictable uncontrollable macro-level threat. It doesn’t matter if this unknown is positive or negative, the fact that it is unknown is bad enough for business.
There is nothing that could kill investment and business worse than this, the unknown, even a good unknown. The fact that it is unknown is just bad enough.
Looking at the current situation in Egypt as off this October 2017 while our researchers and editors are writing this article, some news outlets out there are already suggesting some changes are to take place in the monetary and fiscal policies of Egypt in the following few days, and they are quoting the International Monetary Fund (IMF). There is nothing that could kill investment and business worse than this, the unknown, even a good unknown. The fact that it is unknown is just bad enough.
Here is some scanning of what already happened or what could happen in the coming few weeks:
Fuel Price To Surge
It is highly expected that fuel prices would increase again, even if not in the next few days, it could at least be in the few coming months. This is part of the government’s plan to remove subsidy, a topic that was recently discussed in the Egyptian media on many occasions and by many figures. It is worth mentioning that fuel prices were raised earlier this past summer in a similar circumstance; on a long weekend, something Egyptians lately mocked as a pattern in announcing big controversial decisions.
US Dollar Rate Surged & Plummeted
Some speculations on the USD has already led to some slight increases in rates on October 4, 2017 which quickly plummeted back after it became clearer that there are neither floods of transactions nor worrying news. This could happen over and over again if more people would keep speculating, especially after the claimed IMF statements. This doesn’t mean the USD will remain stable over the few coming days or even months.
Interest Rates To Drop
Starting October 10th, and due to a recent change in regulation (dating October 3rd) by the Central Bank of Egypt (CBE), banks are obliged to deposit 14% of their average client money into the CBE, as opposed to 10% earlier. This means banks will need to compensate this by cutting down from the interest offered to depositors (currently ranging between 18-20%. So we should expect interest rates to slightly drop.
Until November, interest rates are expected to remain around the same value until inflation drops late November both year-on-year and hopefully month-on-month. It is worth mentioning that inflation, being calculated by comparing prices changes in a current month to those in the same month of last year, will show a significant drop this November because comparing this November’s changes to last November’s changes, the former will be lower, hence a lower inflation.
[This] reflects strong underlying structures allowing for this and should give us confidence in more and more stability in the future.
It is worth reminding our readers that recently, Egypt has paid back around $16B of its outstanding debt, which grew by around double that number worth of interest alone. What is interesting here is not the absolute numbers or percentages is the stability of USD rate during the payback times. It reflects strong underlying structures allowing for this and should give us confidence in more and more stability in the future. The answer to what would happen in the next coming weeks remains unanswered.