MAPUTO (Reuters) – Mozambican President Filipe Nyusi has fired the central bank’s deputy governor António Pinto de Abreu, the president’s office said on Tuesday, without giving a reason.
The sacking of de Abreu, who has been deputy governor of the Bank of Mozambique since Dec. 2010, comes ahead of its annual meeting later this week.
(Reporting by Manuel Mucari; Writing by Stella Mapenzauswa; Editing by James Macharia)
ACCRA (Reuters) – Ghana’s central bank kept its benchmark policy rate at 26 percent on Monday citing moderation in the pace of consumer inflation, its governor Henry Kofi Wampah said.
The West African nation is under a three-year aid program with the International Monetary Fund (IMF) to support an economy dogged by high fiscal deficits and public debt, with consumer inflation consistently above government target.
The Bank of Ghana had set the current rate in November, its highest level in 12 years.
“The current tight monetary stance, supported by the continuing fiscal consolidation and improvement in the energy situation have led to a low risk in the outlook,” Wampah told journalists.
Ghana’s consumer inflation rose marginally to 17.7 percent, one of the highest in the West African region but Wampah said the central bank’s monetary tightening in recent months could limit any further rise.
“Going forward, the committee expects the slower pace of price changes to continue and steer inflation down towards the medium target band of eight percent, plus or minus two percent,” Wampah said.
Ghana’s economy is expected to pick up speed this year, even as the government abides by IMF-set spending limits, and Wampah said the bank had begun its zero financing of the budget deficit limit placed on it under the aid deal.
The country is preparing to hold presidential and parliamentary elections in November which are expected to produce a tight race between President John Mahama and Nana Akufo Addo of the main opposition New Patriotic Party, partly due to economic concerns.
(Reporting by Kwasi Kpodo; Editing by Edward McAllister and Dominic Evans)
NAIROBI (Reuters) – Kenya’s current account deficit will fall in 2015 and 2016 and the country’s economy will be supported by macroeconomic stability and low oil prices, its central bank governor said on Thursday.
Patrick Njoroge said the current account deficit was forecast to fall to 8.5 percent of gross domestic product in 2015, from 10.4 percent the year before, and narrow further in 2016.
The currency of the East African country is expected to remain stable after losing 11 percent of its value against the dollar in 2015, he told a news conference.
“We are now closer to the fundamentals,” he said, citing the narrowing current account deficit.
The central bank kept its benchmark lending rate at 11.5 percent on Wednesday, saying its current stance was adequate to dampen inflation.
Njoroge said that high commercial bank lending rates, at above 17 percent in December, were “troubling” but that liquidity was now evenly distributed among banks after getting skewed following the collapse of one bank.
Njoroge said he was open to “real” dialogue with shareholders of Imperial Bank – under receivership since October – and reiterated the fate of the bank will be clearer in March.
(Reporting by Duncan Miriri; Writing by George Obulutsa; editing by Edith Honan and Toby Chopra)
CAIRO (Reuters) – Egypt’s central bank will tighten import regulations from January in a bid to support local manufacturing and better preserve its dwindling foreign currency reserves.
Egypt, which depends on imports, has faced a currency crisis since a 2011 uprising drove foreign investors and tourists away. Hard currency reserves have more than halved $16.4 billion since then.
The decision excludes imports of medicine, foods, and other essential goods such as wheat.
The central bank said it aimed to “strengthen the national economy and promote local products, enhancing their competitiveness against foreign products,” in a statement on Tuesday.
Egyptian manufacturers have been pushing for stricter regulations to stop importers putting artificially low values on customs bills to avoid duties, a widespread practice that makes it difficult for local products to compete on price.
Egypt had imports worth $60.8 billion in 2014/15, compared with exports worth $22.1 billion, said Beltone Financial economist Ziad Waleed.
“They are just fine-tuning the present regulations amid the foreign currency shortage. This definitely could increase the pressure on importers,” he said.
The statement said that banks should obtain documents for imports directly from foreign banks, instead of obtaining them from the clients as is the practice currently. This is to stop any manipulation of receipts by importers, the Egyptian customs authority said on Tuesday.
Importers will also have to provide 100 percent of the cash deposit on letters of credit for imports instead of the current 50 percent.
“The central bank is trying to use all available measures to try to limit imports and this could limit the import of luxury goods, but it is not the key solution that would solve the foreign currency shortage,” Waleed said.
Egypt’s central bank has been rationing dollars and keeping the currency artificially strong at 7.7301 through weekly dollar auctions, giving priority to imports of essential goods.
(Reporting by Asma Alsharif and Ehab Farouk, editing by Louise Heavens)
NAIROBI (Reuters) – Kenya’s central bank governor has yet to complete six months in the job but he has done what few of his country’s officials ever achieve: he has made people feel their money is safe in his hands.
This is less because of Patrick Njoroge’s success in stabilising the plummeting shilling and more to do with his shunning the fleet of luxury cars and the plush villa that come with the post, the kind of perks widely seen as motivating most public servants.
In Africa, people are more used to “Big Men”, who are in office for personal gain. Kenyans use the term “eating” to describe how officials and their kin gorge from the trough of public funds, until they have to hand over to the next guy.
In a nation where many live in villages without mains electricity or proper roads, members of parliament are paid about $94,000 annually, dwarfing the average Kenyan’s $1,290 a year.
“The ‘Big Man’ syndrome – in which the only way to show who I am is by flaunting all the possessions that I have – is kind of dangerous,” said Njoroge, 54, a member of Opus Dei, a Catholic group that encourages those who join to live saintly lives in their everyday work.
For much of an interview with Reuters at the central bank on Tuesday, the Yale-educated banker who was appointed in June rattled off explanations of how monetary policy was anchoring inflation, steadying a currency that was “dropping like a stone” and laying the basis for sustained economic growth.
But he politely and carefully fielded questions about what he called his “simple life”, which has fascinated Kenyans more used to a daily diet of stories about corruption in high office.
“At least we can trust him because he is not there for personal gain,” said James Mwangi, 27, a car salesman, chatting over a beer in a Nairobi bar. “I believe our money is safe.”
When parliament grilled the former International Monetary Fund adviser for the job, questioners focused mostly on his celibacy – a commitment a fellow Opus Dei member says he made on joining the group – and other aspects of his lifestyle.
“The perception that he can’t be bought and, yes, turning down the perks was impressive to Kenyans,” said John Githongo, one of Kenya’s most prominent anti-corruption campaigners.
But Githongo said it was too early to judge his policies. “He’s ex-IMF, not an institution associated with success in Africa,” Githongo said, referring to the Washington-based body’s reputation among critics for pushing liberalising policies in Africa that they say hurt the poor the most.
PROMPT ACTION
Yet Njoroge has won praise from many in Kenya’s finance community. “The tone he has set has been remarkable,” said Aly Khan Satchu, a private investor and financial analyst.
As well as raising interest rates to curb inflation expectations and helping to stabilise the currency, he ordered the liquidation of a small bank and put another lender, mid-tier Imperial Bank, into receivership when massive fraud was uncovered. He did this less than four months into the job.
“Flexibility, being nimble is essential,” the governor said.
When tight monetary policies appeared to starve smaller banks of funds after the Imperial Bank case, the governor reversed course by providing the money markets with more funding, a move welcomed for its promptness.
“Policy makers here … tend not to adjust quickly enough,” said Satchu, alluding to Njoroge’s predecessor who was blamed in 2011 for failing to raise rates quickly enough as inflation rocketed to almost 20 percent and the shilling plunged.
Heavy rains sent food prices soaring and pushed Kenyan inflation to 7.32 percent in November, but it remains within the government’s preferred band. Njoroge said core inflation was slipping, which suggested the headline rate would fall.
“I wish I could say something about controlling the weather,” said the governor.
He joined thousands on a rainy day last month for Mass celebrated by Pope Francis on his first tour of Africa, which began in Nairobi. Njoroge enjoyed one privilege of office: he was in a tent with dignitaries, not under the open skies.
But he has shunned other benefits. Entitled to a Range Rover, Mercedes and VW Passat as governor, Njoroge turns up at events in the cheapest, the VW. “Why not stick to one car?” the governor said, without mentioning the model.
Instead of moving into the governor’s official residence in Nairobi’s smart Muthaiga district, he lives with other members of Opus Dei and donates a portion of his salary to charity, said Andrew Ritho, who works in Opus Dei’s communications office in Kenya.
“You live the way you want to live,” Njoroge said. “Whether the people see it or not, that is secondary.”
(By Edmund Blair and Duncan Miriri. Writing by Edmund Blair; Editing by Giles Elgood)
(Reuters) – Sudan’s central bank has phased out its main liquidity tool used by domestic lenders to an external fund, a move it hopes can serve as a model for other countries aiming to tackle a scarcity of sharia-compliant money market instruments.
Islamic banks have grown faster than conventional ones across the Middle East and southeast Asia, but they largely lack liquidity management tools which the industry views as essential for its long-term health and viability.
Demand for such tools is greater in markets like Sudan, which in 1983 became the first country to require its entire banking system to comply with Islamic principles, banning the charging of interest and outright monetary speculation.
There are 28 Islamic banks in Sudan which hold an estimated $10.7 billion in assets, according to Thomson Reuters data.
The central bank has issued Islamic certificates to address banks’ liquidity needs, with the ministry of finance issuing Islamic bonds of its own.
In 2011, however, the introduction of a real-time settlement system led Sudanese banks to accumulate large amounts of central bank certificates, said Mohamed Ismat Yahya, deputy manager of banking operations.
“There has been a staggering stockpile of these certificates,” Yahya said on the sidelines of an industry conference in Bahrain.
“It was important for us to find other solutions to help banks manage their liquidity management away from the central bank.”
To address this, a liquidity management fund was launched in September of last year, a special purpose vehicle jointly owned by Sudanese lenders and managed by Financial Investment Bank.
The fund has seen a 25 percent increase in capital since its launch to reach 1 billion Sudanese pounds, Yahya said, adding that the central bank is no longer involved in daily liquidity requirements of banks except as a lender of last resort.
“We feel that this experience should be carefully studied and be proposed in other jurisdictions.”
Member banks are required to put in capital with a minimum cash contribution of 40 percent, with the remaining 60 percent to be contributed in the form of securities.
Only a handful of countries have widely-used Islamic interbank tools, with Malaysia and Bahrain developing sharia-compliant alternatives to repurchase agreements.
In July, Islamic banks in Indonesia launched a standard contract template for similar interbank tools.
(By Bernardo Vizcaino. Editing by Shri Navaratnam)
NAIROBI (Reuters) – Kenya’s central bank said on Wednesday that almost 90 percent of depositors in Imperial Bank, which was taken into receivership in October because of fraud, would receive their full deposits back.
Governor Patrick Njoroge told a news conference the private shareholders had said they were “interested in recapitalising” the bank but had not presented a plan till now to allow it to re-open, so liquidation was still an option.
(Reporting by Drazen Jorgic; Writing by Edmund Blair; Editing by Duncan Miriri)
CAIRO (Reuters) – Egypt’s central bank revised the way it allocates dollars at auctions, seeking on Tuesday to reassure markets by repaying foreign investors a backlog of more than $500 million built up during a long-running dollar shortage.
The economy has been in disarray since the 2011 uprising that ended Hosni Mubarak’s 30-year rule, spooking foreign investors and tourists who are the main sources of foreign currency.
Foreign currency reserves have dropped from $36 billion before the revolt to about $16.4 billion in October, leaving the central bank with little firepower to protect the value of the tightly-managed Egyptian pound.
In February, the central bank limited the amount of dollars companies could deposit in banks to squeeze a dollar black market.
Business people say that policy backfired, making it difficult for companies to finance imports and discouraging foreign investors who feared they would be unable to repatriate profits or cash in their investments.
In the first major move by Egypt’s new governor Tarek Amer, who took up his post on Friday, the central bank said it had repaid foreign portfolio investors $547.2 million, clearing the entire backlog.
“This is a very strong signal about the change in management ideology,” said Hany Farahat, senior economist at CI Capital.
“There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.”
The central bank urged foreign investors to enter Egyptian capital markets through a pre-existing scheme set up to help them repatriate their hard currency.
Those who have used the scheme have not faced delays, the central bank said in a statement. But many foreigners have invested without using that mechanism and had struggled — until Tuesday — to obtain dollars and move them out of Egypt.
The measure is the latest in a series taken by the central bank since Amer’s appointment was announced in late October.
Within two weeks of the announcement, banks had supplied $1.8 billion to clear a backlog of imports that had caused an outcry among businesses.
The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.
Amer’s next move came on Nov. 11, when the central bank supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies during the crisis.
Mohamed El Sewedy, the head of the Federation of Egyptian Industries, told Reuters in a recent interview Amer had promised to cover the entire $4 billion exposure.
At the same time, the central bank strengthened the pound by 20 piastres — a surprise move given the gap with the black market rate, now hovering about 8.5 pounds to the dollar.
Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.
CURRENCY AUCTION
The central bank held the pound steady at 7.7301 to the dollar at its second official dollar auction under Amer, but caused confusion by supplying some banks with more of their forex needs than usual and others with nothing at all.
Egypt’s central bank holds three foreign exchange auctions a week, and the sales are the key mechanism through which it sets the official exchange rate of the pound.
Banks are accustomed to receiving a regular quota of foreign exchange at each foreign currency sale.
Bankers said some banks had bid late in the auction due to uncertainty over whether the central bank would move the exchange rate or hold it steady and had missed out. Others said some banks who bid early in the session were also refused.
The central bank said it had changed the “internal allocation process” but gave no details on the changes or whether they would apply to future forex auctions.
Amer, the well-regarded former head of commercial lender National Bank of Egypt (NBE), faces a delicate balancing act as he seeks to end the foreign exchange pressure without triggering inflation, which hurts the poor hardest, or dampening the growth needed to create jobs for its growing population.
(By Asma Alsharif. Additional reporting by Eric Knecht’ Writing by Lin Noueihed; Editing by Ruth Pitchford)
CAIRO (Reuters) – From bankers to carmakers, Egypt’s business community will breathe easier when Tarek Amer takes charge at the central bank on Friday, with hopes high he will revamp a monetary policy that has undermined investment and growth.
Announced last month, the leadership change unleashed anger against outgoing governor Hisham Ramez, who capped dollar deposits at $50,000 a month, starving businesses of hard currency and paralysing trade as he sought to defend the country’s pound.
Amer, the well regarded former head of commercial lender National Bank of Egypt (NBE), has already been working hard behind the scenes to inject fresh funds into a sclerotic financial system, and he is widely expected to lift the cap.
But with inflation high and the pound propped up by unsustainable central bank dollar sales, he will also need to tread a fine line between allowing the currency to settle lower while avoiding the sharp devaluation that would worsen the imbalances he is trying to correct.
“There is a belief that Tarek Amer will cancel the cap on dollar deposits at banks,” said an under-the-counter currency trader. “There is an optimistic atmosphere among clients of exchange companies and in the parallel market.”
Black market traders, bankers and businesspeople also expect Amer to work with the government to dampen demand for dollars by regulating imports and supporting exports — a source of hard currency battered by the capital controls.
Egypt’s economy has struggled since the 2011 uprising that ended Hosni Mubarak’s 30-year rule drove away investors and tourists, robbing it of foreign currency and putting the pound under severe pressure.
Fearing runaway inflation, the central bank has maintained the pound within a narrow band, but pressure has persisted.
In February, Ramez imposed the deposit caps and forced banks to prioritise food and medicine when supplying scarce dollars.
But the measures made it hard for companies to get credit to pay for imports and, as goods mouldered at ports and some factories stopped production, exports slumped by 19 percent in the first nine months.
To the business community’s relief, President Abdel Fattah al-Sisi announced in October that Ramez would not renew his term as governor when it expired on Nov. 26.
“As long as in the central bank of Egypt there are people who are managing wisely… you should never have a foreign exchange crunch,” Raouf Ghabbour, chief executive of GB Auto, told Reuters in a recent interview.
As well as cancelling Ramez’s preventative measures, Amer should also raise interest rates, he said.
BEHIND THE SCENES
A veteran banker credited with reviving state-owned NBE, Amer began meeting with captains of industry in October.
Within two weeks, banks had supplied $1.8 billion to clear the import backlog. [ID:nL8N12Y3D0]
The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.
Amer’s next move came on Nov. 11, when the central bank strengthened the pound by 20 piastres and supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies.
Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.
Mohammed al-Naggar, head of research El Marwa Brokerage, said he believed Amer could strengthen the pound again.
“The market expects the central bank to increase the value of the pound by 10 piastres in the first (dollar) auction under Tarek Amer,” he told Reuters. “There are expectations for a big surprise.”
Expectations of change received a boost on Thursday, when Farouk al-Okda was appointed to a central bank committee of government ministers and economic experts tasked with setting the monetary agenda.
Okda, who led the central bank from 2003-2013, was credited with helping stabilise the pound within a managed floating exchange rate, and helping establish an interbank foreign exchange market that helped curtail the black market.
The revival of the central bank’s coordination council has raised hopes of greater collaboration between the central bank and the government –neglected under Ramez.
“The central bank is semi-independent but in these circumstances it will have to work hand in glove with the (government)… to come up with solutions,” said Angus Blair, chairman of Signet Institute, an economic think tank.
NO EASY ANSWERS
While an eventual devaluation looks unavoidable, turning around Egypt’s monetary policy will be a tricky balancing act.
An emerging market rout has left the pound overvalued, despite a depreciation of about 10 percent this year. Yet a sharp devaluation would stoke inflation in an import-reliant country where millions live hand to mouth, fuelling the kind of street protests that helped unseat two presidents in three years.
The government announced this week it would control the prices of 10 essential commodities — a move some read as an effort to protect vulnerable Egyptians from inflation unleashed by an eventual devaluation.
In the meantime, reforms to address the ballooning trade deficit could strengthen the economy ahead of any shocks.
Egyptian Federation of Industries head Mohamed El Sewedy told Reuters recently he expected the government to implement an indicative pricing mechanism for imports before the end of the year, curtailing the common practice of avoiding customs duties by undervaluing imports on bills.
“If I regulate trade, the appetite for dollars … will become more orderly,” said El Sewedy, adding that Amer had promised to cover the remaining $3 billion of banks’ credit exposure.
Egypt’s benchmark overnight lending rates are already high at 9.75 percent, but with foreign reserves languishing at $16.4 billion – enough for just three months of imports – economists believe borrowing costs will have to rise further to avert inflation and dollarisation. The victim of high rates could be much-needed growth.
“It’s a lot to do for a new central bank governor,” said Blair. “I don’t envy him but it is a great shame he wasn’t appointed earlier.”
(By Lin Noueihed. Additional reporting by Nadia El Gowely and Ehab Farouk; editing by John Stonestreet)
ABUJA (Reuters) – Nigeria’s central bank surprisingly cut the benchmark interest rate to 11 percent from 13 percent on Tuesday, its first reduction in the cost of borrowing in more than six years, in an effort to stimulate growth in Africa’s biggest economy.
The bank also reduced the cash reserve ratio for commercial banks to 20 percent from 25 percent, another move to try to inject liquidity into the banking system and encourage lending.
The central bank has been injecting cash into the banking system since October in a bid to stave off recession in Africa’s top oil producer, which has been hit hard by the sharp fall in crude prices over the last year.
“We must stimulate growth,” Governor Godwin Emefiele said, adding that committee members had voted by a margin of eight to two in favour of the reduction.
He said the step was taken “in consideration of the weakening fundamentals of the economy, particularly the low output growth, rising unemployment and the uncertainty of the global economic environment”.
The move took many in the market by surprise. In a Reuters poll, 15 of 23 analysts had predicted the central bank would hold the monetary policy rate at 13 percent, while four expected a 100-basis point cut.
The bank also broadened its interest rate corridor to 200 basis points above the benchmark rate and 700 basis points below, which means it will borrow from commercial lenders at four percent and lend to them at 13 percent.
The regulator hopes the measures will provide an incentive to banks to lend to local manufacturers such as food producers – in line with President Muhammadu Buhari’s policy of boosting output of rice and other basic food items.
Nigeria’s benchmark 20-year bond yield fell 95 basis point between Monday and Tuesday as some traders had expected the central bank to lower rates.
Emefiele said fresh liquidity from the cash reserve rate cut would only go to banks that were ready to channel it into “employment generating activities” such as infrastructure projects, the agricultural and minerals sectors.
He rapped those banks which had used a cut in the cash reserve ration in September to invest in bonds rather than lend to households and businesses.
“Unfortunately what we have found out is that rather than banks redeploying that liquidity… what the banks do is just dump their money on CBN (the central bank) and earn 11 percent – and I use the words – for doing nothing,” Emefiele said.
Standard Chartered’s chief Africa economist Razia Khan said the easing of monetary policy was aimed at boosting the real economy but their success would also depend on the availability of foreign exchange.
The central bank has restricted access to foreign currency to stop a slide in the naira, effectively pegging it at 197 to the dollar. Emefiele said the restrictions, which importers say is crippling their operations, were working well.
“Nigeria has sacrificed free movement of capital in order to keep the NGN at 200 (per dollar) while cutting interest rates to help the budget,” Charles Robertson, head of research at Renaissance Capital.
“Unfortunately this will not produce budget revenue growth…It also reduces the return for owning naira, which will presumably encourage more purchasing of U.S. dollars instead,” he said.
(By Julia Payne and Camillus Eboh. Additional reporting by Lagos newsroom; Writing by Alexis Akwagyiram and Ulf Laessing; Editing by Ed Cropley and Richard Balmforth)
