(Bloomberg) -- Egypt extended Hassan Abdalla’s leadership of the central bank by another year, a move that may reassure investors the North African nation is committed to orthodox monetary policies after a dramatic interest-rate hike and currency devaluation earlier this year.
President Abdel-Fattah El-Sisi’s decision to retain the 64-year-old veteran financier was announced Monday in Egypt’s Official Gazette. It comes just over than a month after authorities made a swathe of new cabinet appointments as Egypt seeks to move on from its worst economic crisis in decades.
Abdalla, who first took over in an acting capacity in August 2022 that was renewed a year later, has played a key role in efforts to tackle the foreign-currency crunch. His rule has seen three devaluations of the pound. A 40% plunge against the dollar in March and a rise in the bank’s key interest rate to 27.25% helped Egypt secure a global bailout — led by the United Arab Emirates and International Monetary Fund — totaling some $57 billion.
By pledging to let the market determine exchange rates, Abdalla’s policies represent a steep change from his predecessor, Tarek Amer, who supported a stable pound and backed import curbs to limit domestic demand for dollars.
Abdalla was involved in a late-2022 loan deal with the IMF and subsequently led negotiations that saw the facility more than double in size to $8 billion shortly after the latest devaluation.
His new term will see him keeping up the fight against inflation that remains one of Egypt’s major challenges. When foreign exchange was in short supply, importers turned to the local black market for their needs, passing along the pound’s much weaker rate to consumers. That sent prices soaring a record 38% in September 2023.
Inflation has cooled since, even after March’s devaluation, hitting 25.7% last month. A new wave of government subsidy cuts, though, may add to price pressures.
Investors will also be closely following the performance of the pound for assurance Egypt’s policies have truly changed. And, with authorities promising an industrial and manufacturing revival, businesses will also be relying on the central bank to ensure they have unfettered access to foreign currency once again.
Abdalla, in a rare public speech last year, suggested higher borrowing costs can do little to contain inflation caused by supply shortages. Nonetheless, he’s raised interest rates a total of 1,600 basis points in his two years in charge. Most economists predict an easing cycle will begin later this year or early 2025.
A well-respected figure in the business community, Abdalla previously held senior positions at the Arab African International Bank and is also the founder of Panther Associates, a boutique financial advisory firm.
--With assistance from Abdel Latif Wahba.
(Updates with background.)
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