Fitch: Egypt's banking sector capable of facing repercussions of Egyptian pound depreciation

Fitch Ratings said that the compulsory reserve ratios within Egyptian banks are able to withstand any declines in the value of the pound because they are supported by reasonable inflows of capital, noting that major private sector banks are in a better position to withstand currency depreciation than the two largest state-run banks, namely NBE and Banque Misr, given the increase in the mandatory precautionary reserve.

The report pointed out that the Egyptian currency may remain under pressure in 2023 due to the accumulation of imports and the large external financing needs estimated at more than $19 billion for 2023.

“Fitch” indicated that there is anticipation for the Central Bank of Egypt regarding whether it will allow the exchange rate and interest rates to be adjusted sufficiently to attract inflows of new portfolios, noting that some Egyptian banks maintain open positions for long-term currencies, which could lead to pressure on rates. capital due to risk-weighted assets (RWA) inflation.