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UPDATE 1-Egypt M2 money supply rises to five-year high in July
August 29, 2013 / 2:02 PM / 4 years ago

UPDATE 1-Egypt M2 money supply rises to five-year high in July

(Adds analyst comments, background)
    CAIRO, Aug 29 (Reuters) - Egypt's M2 money supply growth
accelerated to 19.4 percent in the year to the end of July, the
central bank said on Thursday, its fastest pace in over five
years and a possible portent of continued high inflation over
the coming year.
    Economists said the monetary growth might be explained by an
increase in direct government borrowing from the central bank as
it works to plug a widening budget deficit after two and a half
months of renewed political and economic turmoil. 
    The government borrowed 82.2 billion Egyptian pounds ($11.8
billion) directly from the central bank in the first seven
months of 2013 and 145.2 billion pounds in the 12 months since
July of last year, according to central bank figures. 
    The high money supply growth could also be caused by
restrictions the central bank has placed on transferring funds
out of the country. 
    "If you can't get your money out of the country, you have no
choice but to deposit it with the banks," said an economist
based outside of Egypt. 
    Economists said the higher money supply could lead to
inflation as more pounds chase the same amount of goods and
    "It's an indicator of inflationary pressure," said Mona
Mansour of CI Capital. "We're expecting inflation to be higher."
    Egypt's urban consumer inflation surged to an annual 10.3
percent in July, its highest in two years. 
    Money supply rose to 1.316 trillion Egyptian pounds ($188
billion) from 1.296 trillion at the end of June and 1.102
trillion at the end of July 2012. It is the fastest year-on-year
monetary growth since April 2008.
    Following is a table of the latest M2 figures in billions of
Egyptian pounds, according to the central bank's website 
 (In bln pounds)          July 2013   June 2013  July 2012 
 Domestic liquidity (M2)  1,316.2     1,295.8    1,101.9
 ($1 = 6.9850 Egyptian pounds)

 (Reporting by Patrick Werr; Editing by Toby Chopra)

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