Amid foreign currency shortage, Egypt launches new high-interest dollar savings certificates

Amid a national foreign currency shortage, leading state banks Banque Misr and the National Bank of Egypt began on Tuesday to offer two new types of dollar-denominated savings certificates, with annual yields of either seven or nine percent.

Other banks currently offer rates of around five percent on dollar savings certificates.

Customers depositing savings in the new seven-percent “peak” scheme can choose whether they wish to receive their returns — which will be paid back to them in dollars — on a monthly, quarterly or annual basis. The certificates are valid for three years and are available to Egyptian nationals or foreigners with a minimum deposit of USD$1,000.  

Customers who opt for the three-year “elite” nine percent rate of return scheme will receive the entire value of the nine percent annual yield on their dollar deposit immediately, though the value of the yield will be paid out to them in Egyptian pounds at the official exchange rate. The original value of the “elite” deposit, likewise a minimum of $1,000, will be returned in US dollars at the end of the savings term.

A number of high-interest savings certificate options have been issued by government banks since early 2022, when Egypt’s foreign currency reserves were stretched thin by a major foreign investor exit paired with the inflationary wave rippling outward in the wake of Russia’s invasion of Ukraine.

With the money supply low, endangering the capacity of banks to meet dollar payment schedules, the high savings interest rates help to keep customer cash in the banking system. 

To buck the trend of people withdrawing their dollars from the banking system amid declining trust in the value of the Egyptian pound — which has depreciated over 50 percent against the dollar since March 2022 — the new certificates “raise the cost of withdrawing US dollar deposits from the banking system,” said an investment manager at a US consulting company operating in Egypt.

National Bank of Egypt vice-president Yahya Aboul Fotouh said on Tuesday that any amount deposited in US dollars for the new certificates will be accepted without inquiry about their source.

This new certificate issuance and the disregard for whether new dollars deposited are coming from the black market, said a former prominent figure at the Central Bank of Egypt speaking to Mada Masr on condition of anonymity, bespeaks the government’s “exceptionally dire” need for foreign currency resources at present.

It’s the highest interest rate on a foreign currency savings certificate to be offered by the Egyptian banking system since the early 1990s, said the investment manager.

High-interest savings certificates denominated in Egyptian pounds were issued by the two state banks in March and May last year with 18 percent yields, while the Commercial International Bank offered savings certificates with a 22 percent rate of return for a short, four-day window in April.

*Writing by Ahmed Bakr