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Egypt’s Pound slides as IMF Deal triggers New exchange Rate Regime

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Egypt’s pound slid about 14.5 per cent to a record low against the dollar on Thursday as authorities announced a three billion dollars International Monetary Fund (IMF) deal with a commitment to a “durably flexible exchange rate regime”.

The central bank also raised interest rates by 200 basis points in an out-of-cycle meeting, saying it aimed to anchor inflation expectations and contain demand-side pressures.

Egypt had been in talks with the IMF for a new loan since March after its economic woes deepened due to the war in Ukraine.

The fund has long been urging Egypt to allow greater exchange rate flexibility.

In a statement confirming a staff-level agreement on a three billion dollars, 46-month Extended Fund Facility, the IMF said a flexible exchange rate regime should be “a cornerstone policy for rebuilding and safeguarding Egypt’s external resilience over the long term”.

It said the deal was expected to catalyse a large, multi-year financing package, including about five billion dollars in the fiscal year ending June 2023, reflecting “broad international and regional support for Egypt”.

Egypt’s central bank said it was intent on intensifying economic reforms and had “moved to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the EGP against other foreign currencies”.

The pound weakened rapidly to around 23 to the dollar from 19.67, data from Refinitiv showed.

That was similar to the parallel market rate and indicated a currency float, Naeem Brokerage said in a note.

The bank had already allowed the pound to depreciate by 14 per cent against the dollar in March, and the currency had been slipping gradually since May.

Former central bank governor Tarek Amer, under whom the pound had long been held steady, was abruptly replaced in August.

Non-deliverable futures, which FX traders use to bet on moves in the currency over various timeframes, pointed to the pound falling to around 24 per dollar over the next three months and 26 per dollar over the next year.

Egypt’s international government bonds also gave back the gains they had made earlier in the day, which had lifted the price of most of them by more than two cents on the dollar.

The war in Ukraine pushed up Egypt’s bills for wheat and oil while dealing a blow to tourism from two of its largest markets, Ukraine and Russia, a key source of hard currency.

In its statement on Thursday, the central bank said the conflict had “dire economic ramifications” and consequently led Egypt to experience large capital outflows.

Annual headline inflation accelerated to 15 per cent in September, its highest in almost four years, according to official data. Price rises, which come after years of austerity reforms under a 2016 IMF deal, have hurt many of Egypt’s 104 million population.

On Wednesday, the government raised the public sector minimum wage by 11 per cent to 3,000 Egyptian pounds, extended a freeze on residential electricity prices by six months to June 2023, and also extended food subsidy card benefits.

The central bank said it would continue to announce inflation targets “along the predetermined disinflation path that began in 2017”. The bank’s existing target is 5 per cent to 9 per cent.

The 200-bps raise in rates brings the overnight lending rate to 14.25 per cent and the overnight deposit rate to 13.25 per cent.

The size of the IMF deal appeared in line with the lower end of expectations, said Emre Akcakmak, a Dubai-based senior consultant at East Capital.

“What’s more important to note is that the central bank seems to be more decisive in its fight against rising inflation and in moving closer to a flexible exchange rate system,” he said.

The central bank also said that it would gradually phase out by December a rule that mandated the use of letters of credit for import finance.

The rule, an effort to preserve scarce dollars, had caused a major slowdown in imports of everything from consumer goods to industrial components and left some basic commodities stuck at ports.

In order to deepen the foreign exchange market and enhance its liquidity, the central bank said it would work towards building the foundations for a derivatives market. (NAN)

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Militants in Lebanon Launched 6 Suicide Drones at Israel, Causing Fire

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Militants in Lebanon launched six unmanned aerial vehicles at northern Israel on Tuesday, causing fire and damage.

Only one of the drones was intercepted by the country’s Aerial Defense Array, the Israeli military said in a statement.

“One of the drones exploded near the community of Yiftah, close to the Israel-Lebanon border, sparking a fire,” he said.

The Israeli military added that several other drones caused light damage, with no causalities reported.

Israel’s state-owned Kan TV news reported that the drones were launched by Hezbollah, a Lebanese armed group and party, which had been fighting against Israel along the border since Oct. 7, 2023.

Lebanese military sources, who spoke anonymously, said that Israel’s F-15 warplanes intercepted, at very low altitudes, several drones that were heading from Lebanon to northern Israel.

Hezbollah said on Tuesday that its military wing, the Islamic Resistance, targeted Israeli officers and soldiers in the Yiftah barracks with drones while reporting casualties.

The drones targeted an Iron Dome platform in the Ramot Naftali Barracks, damaging it, he said.

The drones came after Israeli troops fired at Aalma El Chaab in southern Lebanon.

On Monday, Israeli warplanes stroked a Hezbollah military structure and infrastructure in the area of Mazraat Aaqmata in southern Lebanon.

Earlier Tuesday, Lebanese Labor Minister, Moustafa Bayram, said that Israeli attacks caused damage to around 3,000 business facilities in southern Lebanon, according to the National News Agency (NNA).

Bayram said he would contact the Arab Labor Organization and Arab member states as soon as the war ends to request a grant for people affected by Israeli attacks. (Xinhua/NAN)

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Flames, Smoke Continue to Emerge from Massive Landfill in Delhi

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Flames and columns of thick smoke continued to emerge from a massive landfill in the Indian capital city of New Delhi on Monday, officials said.

Fire fighting operations were underway and fire-fighters were splashing water on the burning mounds of garbage.

The fire has continued at the colossal landfill site since it broke out on Sunday evening.

Meanwhile, toxic fumes emanating from the landfill have left residents in the neighbourhood to gasp for breath.

“There is a pungent smell all around. The smoke is poisonous and causes irritation in the eyes,’’ Dileep Pandey said.

Pandey is a local resident, living within the area.

“We are also facing difficulty in breathing.

’’

While the cause of the fire remained undetermined, authorities have initiated legal proceedings against unidentified individuals in relation to the incident.

According to the Delhi Fire Services department, the landfill caught fire because of the methane produced in the heaps of waste.

Officials listed hot and dry weather conditions as the reason behind the blaze. (Xinhua/NAN)

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Israeli Forces Vow Response to Iran’s Attack Despite Calls for Restraint

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Israelis awaited word on how Prime Minister Benjamin Netanyahu would respond to Iran’s first-ever direct attack as international pressure for restraint grew amid fears of an escalation of conflict in the Middle East.

Netanyahu on Monday summoned his war cabinet for the second time in less than 24 hours to weigh a response to Iran’s massive weekend missile and drone attack, a government source said.

While the attack caused no deaths and little damage, thanks to the air defences and countermeasures of Israel and its allies, it has increased concerns that violence rooted in the Gaza war is spreading, and fears of open war between the long-time foes.

Israeli military chief of staff Herzi Halevi said on Monday that “this launch of so many missiles – cruise missiles and drones – into Israeli territory will be met with a response” but gave no details.

Iranian Deputy Foreign Minister Ali Bagheri Kani told state TV on Monday night that Tehran’s response to any Israeli retaliation would come in “a matter of seconds, as Iran will not wait for another 12 days to respond”.

But the prospect of Israeli retaliation has alarmed many Iranians already enduring economic pain and tighter social and political controls since protests in 2022-23.

Iran launched the attack in retaliation for an airstrike on its embassy compound in Damascus on April 1 attributed to Israel, and signalled that it did not seek further escalation.

U.S. President Joe Biden told Netanyahu at the weekend that the United States, which helped Israel blunt the Iranian attack, would not participate in an Israeli counter-strike.

Since the war in Gaza began in October, clashes have erupted between Israel and Iran-aligned groups based in Lebanon, Syria, Yemen, and Iraq.

Israel said four of its soldiers were wounded hundreds of metres inside Lebanese territory overnight, the first known Israeli ground penetration into Lebanon since the Gaza war erupted, although it has traded fire with the Lebanese Hezbollah militia.

“We’re on the edge of the cliff and we have to move away from it,” Josep Borrell, the European Union’s foreign affairs chief, told Spanish radio station Onda Cero.

French President Emmanuel Macron, German Chancellor Olaf Scholz and British Foreign Secretary David Cameron made similar appeals.

Washington and UN Secretary-General Antonio Guterres also have called for restraint.

White House national security spokesman John Kirby declined on Monday to say if Biden had urged Netanyahu in talks on Saturday night to exercise restraint in responding to Iran.

“We don’t want to see a war with Iran. We don’t want to see a regional conflict,” Kirby told a briefing, adding that it was for Israel to decide “whether and how they’ll respond”.

Foreign Minister Israel Katz said he was “leading a diplomatic attack” alongside Israel’s military response, writing to 32 countries to place sanctions on Iran’s missile programme and proscribe its Revolutionary Guards Corps as a terrorist organisation.

U.S. Treasury Secretary Janet Yellen said Iran’s actions threatened stability in the Middle East and could cause economic spillovers.

The U.S. would use sanctions, and work with allies, to keep disrupting Iran’s “malign and destabilising activity”, she added.

However, some analysts said the Biden administration was unlikely to seek to sharpen sanctions on Iran’s oil exports due to worries about boosting oil prices and angering top buyer China.

In a call between the Chinese and Iranian foreign ministers, China said it believed Iran could “handle the situation well and spare the region further turmoil” while safeguarding its sovereignty and dignity, according to Chinese state media.

Russia has refrained from publicly criticising its ally Iran but has also warned against further escalation.

Iran’s retaliatory attack, involving more than 300 missiles and drones, caused modest damage in Israel and wounded a 7-year-old girl.

Most missiles and drones were shot down by Israel’s Iron Dome defence system and with help from the U.S., Britain, France and Jordan.

In Gaza itself, where more than 33,000 Palestinians have been killed in the Israeli offensive according to Gaza health ministry figures, Iran’s action drew applause.

Israel began its campaign against Hamas, the Iranian-backed Palestinian militant group that runs Gaza, after Hamas attacked Israel on Oct. 7, killing 1,200 people and taking 253 hostages, by Israeli tallies.

British Prime Minister Rishi Sunak said the Group of Seven major democracies were working on a package of coordinated measures against Iran.

Italy, which holds the rotating G7 presidency, said it was open to new sanctions and suggested any new measures would target individuals.

Iran’s attack prompted at least a dozen airlines to cancel or reroute flights, with Europe’s aviation regulator still advising caution in using Israeli and Iranian airspace. (Reuters/NAN)

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