The Monetary Policy Committee of the Central Bank of Egypt (CBE) is scheduled to hold a meeting on Thursday to determine whether the interest rate would be further raised in Egypt.
Economist Ahmed Shawky told Al-Masry Al-Youm that he anticipates the CBE to fix interest rates in Egypt, in an attempt to reduce the medium and short-term inflation rates, based on several indicators – the first of which is related to inflation that is starting to decline relatively.
Another reason for the CBE to fix interest rates is that raising interest would increase the burden of financing on companies and institutions, at a time when the government is targeting a strategy of rapid growth, he added.
Raising interest rates affects the state’s general budget and increase the external debt burden, which the government is seeking to reduce to 75 percent of GDP in the coming years, Shawky said.
Economic researcher Yassin Ahmed explained earlier that every one percent increase in the interest rate causes the state’s general budget to bear an additional debt burden of about LE32 billion, which leads to an increase in the interest cost in the state’s general budget, and thus impacts the debt and the budget deficit.
Ahmed told Al-Masry Al-Youm that raising interest rates will not bear fruit, as raising interest rates in the past did not achieve the desired results nor did it reduce inflation rates.
Edited translation from Al-Masry Al-Youm