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Egypt: Central Bank Keeps Key Interest Rates Unchanged

FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
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Egypt: Central Bank Keeps Key Interest Rates Unchanged

FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo
FILE PHOTO: A general view of the new headquarters of Central Bank of Egypt, at the New Administrative Capital (NAC) east of Cairo, Egypt December 8, 2023. REUTERS/Amr Abdallah Dalsh/File Photo

Egypt's central bank kept its overnight interest rates steady on Thursday, as expected, saying that while economic growth had slowed, rising non-food inflation had offset a steady decline in food inflation.
The meeting of the central bank's Monetary Policy Committee (MPC) was its first since Egypt signed an $8 billion financial support agreement with the International Monetary Fund (IMF) in March, when it hiked rates by 600 basis points (bps).
The MPC on Thursday left the lending rate unchanged at 28.25% and the deposit rate at 27.25%, it said in a statement.
The hold was widely expected, with only one of 19 analysts in a Reuters poll forecasting that the MPC would lower rates.
Interest rates are still well below the headline inflation rate, which was running at 32.5% in April. Inflation has declined from a record 38% in September.
"Forecasts indicate that inflation has already peaked and thus is expected to moderate in 2024 as inflationary pressures begin to subside," the MPC said in a statement accompanying the interest rates decision.
The MPC said economic growth had slowed to 2.3% in the fourth quarter of 2023 from 4.2% a year earlier and that indicators suggested growth would remain subdued in the first quarter of 2024.
The central bank raised interest rates on March 6 as part of its agreement with the IMF, bringing total increases since the beginning of the year to 800 bps.
As part of the IMF agreement, Egypt allowed its currency to tumble to under 50 to the dollar after having fixed it at 30.85 for a year. The Egyptian pound has since strengthened to about 47.1 to the dollar.

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Egypt, IMF Hold New Discussions to Alleviate Citizens’ Financial Burdens

Sisi and IMF Managing Director Kristalina Georgieva. (Reuters file photo)
Sisi and IMF Managing Director Kristalina Georgieva. (Reuters file photo)
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Egypt, IMF Hold New Discussions to Alleviate Citizens’ Financial Burdens

Sisi and IMF Managing Director Kristalina Georgieva. (Reuters file photo)
Sisi and IMF Managing Director Kristalina Georgieva. (Reuters file photo)

Egypt and the International Monetary Fund (IMF) have agreed to review their joint credit facilitation program to ensure that no additional burdens are placed on citizens.

Egyptian Prime Minister Mostafa Madbouly reiterated the government’s commitment to “maintaining a flexible exchange rate in coordination with the central bank to safeguard the progress achieved in this area.” He expressed hope that the meetings with the IMF delegation in the coming days would “conclude the fourth review of the economic reform program.”

Following a meeting on Sunday between President Abdel Fattah al-Sisi and IMF Managing Director Kristalina Georgieva in Cairo, the Egyptian Presidency announced that Georgieva expressed her “full understanding of the significant challenges Egypt faces amid regional and global developments.”

In March, Egypt signed an $8 billion extended financial support package with the IMF, which requires reducing subsidies on fuel, electricity, and essential goods and allowing the Egyptian pound to float.

In late October, Sisi warned that his government might need to reassess its program with the IMF if international institutions do not account for the extraordinary regional challenges the country is facing. He cited a nearly 60% drop in Suez Canal revenue due to security tensions in the Red Sea as an example.

During the meeting with Georgieva, Sisi expressed Egypt’s commitment to continuing its cooperation with the IMF, building on progress to boost economic stability and reduce inflation. However, he stressed the need to acknowledge recent challenges Egypt has faced due to regional and international crises, which have impacted foreign currency reserves and budget revenues.

Sisi reiterated that the government’s primary focus is on alleviating pressures on citizens, particularly by controlling inflation and curbing rising prices, while also continuing efforts to attract investments and empower the private sector to drive employment and growth.

Georgieva, in turn, commended Egypt’s recent efforts and the reform program being “carefully implemented with a focus on the most vulnerable.” She highlighted the progress in macroeconomic indicators despite unprecedented current challenges, noting that this has been reflected in positive assessments from international credit rating agencies, improved credit ratings, and increased investments.

She expressed her “full understanding of the significant challenges Egypt faces amid regional and global developments” and emphasized the IMF’s commitment to working with the Egyptian government to identify optimal reform paths.