Cairo - Decypha: Economic analysts are expecting the Central Bank of Egypt (CBE) to maintain interest levels in the upcoming meeting of its Monetary Policy Committee (MPC) on 31 March.
The Head of Research at Pharos Holding, Radwa El-Swaify, expects the MPC to keep the current levels of the interest rate, regardless of the US interest rate, which is forecast to be raised by the Federal Reserve multiple times this year.
El-Swaify added that the CBE had taken the rise of the US dollar into consideration when it raised interest rates by 3% or 300 basis points, after the decision to liberalise the exchange rate in November.
The cost of raising interest rates will be very expensive as it will negatively affect the budget balance, credit, and growth rates, without offsetting the rise in inflation nor maintaining the exchange rate, which is beginning to settle.
Raising interest will not bring back foreigners to Egyptian debt instruments, as the main reason behind the recent reluctance is the fall of the USD to the levels of EGP 15-16, confusing their calculations, El-Swaify explained. She also expects foreign investments to return to treasury bills when the greenback levels at above EGP 17.
Analyst Noman Khaled of CI Capital also expects the CBE to maintain interest rates, as an increase will add more burdens to the general budget, while lowering interest rates remains ruled out, due to the fluctuations in cash inflows and exchange rates.
Economic analyst at Mubasher International, Esraa Ahmed, also added that the right choice seems to be maintaining interest rates since any increase will not affect the surge in inflation rates, and will negatively affect growth rates.
Raising interest rates will also increase the interest on governmental debt instruments which would take up the biggest share in the country’s public budget.
The data of the Central Agency for Public Mobilization and Statistics (CAPMAS) recently showed a 29.6% jump in the consumer price index in Egypt in January.
The Egyptian economic reform programme reportedly relies on maintaining proper interest rates to avoid a surge in prices; in addition current inflation is believed to be due to an increase in costs, not from higher deman, according to a report published MubasherTrade.
As per the agreement with the International Monetary Fund (IMF), the Egyptian government is obliged to monitor liquidity levels to avoid more inflationary pressures, the same report stated.
Last week reports surfaced that Egypt’s inflation rate surged to 30.2%, its highest levels since 1986, with food prices soaring past the 45% mark.
