CAIRO: Egypt’s central bank on Thursday cut its key interest rates for the second month in a row, after inflation fell further and as central banks globally ease monetary policy.
The overnight deposit and lending rates were cut by 100 basis points to 13.25% and 14.25% respectively.
All 11 economists surveyed by Reuters had said the Central Bank of Egypt’s (CBE) monetary policy committee would cut rates. Five said the bank would cut by 100 bps, three predicted a 150 bps cut and three 50 bps.
“It’s good for the economy, but broadly in line with expectations,” said Allen Sandeep, head of research at Egypt-based Naeem Brokerage, which predicted a 150 bps cut.
“We expect the monetary easing cycle to continue as inflation is likely to drop further before the MPC meets again in November,” Sandeep said.
The central bank cut rates after inflation figures fell to their lowest in more than six years, it said in a statement.
“Globally, the expansion of economic activity continued to weaken, financial conditions eased, and trade tensions continued to weigh on the outlook,” the bank said. “International oil prices remain subject to volatility due to potential supply-side factors that include geopolitical risks.”
July inflation came in significantly below expectations, and the headline figure fell further in August to a six-year low of 7.5%. Headline inflation reached a 2019 high of 14.4% in February.
At its last policy meeting in August, the central bank slashed its overnight deposit and lending rates by 150 basis points to 14.25% and 15.25% respectively.
The low July inflation figures took analysts by surprise as they had expected inflationary pressures to rise in the wake of a round of subsidy cuts that pushed fuel prices 16-30% higher.
The fuel price hikes were the last in a series of subsidy cuts tied to a three-year $12 billion loan from the IMF. Other reforms tied to the deal included devaluing the currency by about half and introducing a value-added tax.
The reforms have made Egypt an emerging market darling, and economists have hailed the measures. But millions of Egyptians are still struggling to make ends meet, despite the more positive economic data.
“It could have been more but I’m glad the MPC cut the rates. It is a good move,” said Angus Blair, chairman of business and economic forecasting think-tank Signet.
“It will not affect the economy too much as Egypt’s household and corporate sectors are not too leveraged,” he said. “It will, however, help to bring down the government’s debt burden and give it greater fiscal maneuverability.”
The bank’s decision to make a second consecutive cut came after Egypt’s main stock index suffered heavy losses between Sunday and Tuesday following rare weekend protests against alleged government corruption.
The benchmark EGX30 index rebounded, gaining 3.2% on Wednesday and 1.9% on Thursday.
Egypt’s central bank makes second consecutive cut to key rates
Egypt’s central bank makes second consecutive cut to key rates
- The overnight deposit and lending rates were cut by 100 basis points to 13.25% and 14.25% respectively
Emerging markets should depend less on external funding, says Nigeria finance minister
RIYADH: Developing economies must rely less on external financing as high global interest rates and geopolitical tensions continue to strain public finances, Nigeria’s finance minister told Al-Eqtisadiah.
Asked how Nigeria is responding to rising global interest rates and conflicts between major powers such as the US and China, Wale Edun said that current conditions require developing countries to rethink traditional financing models.
“I think what it means for countries like Nigeria, other African countries, and even other developing countries is that we have to rely less on others and more on our own resources, on our own devices,” he said on the sidelines of the AlUla Conference for Emerging Market Economies.
He added: “We have to trade more with each other, we have to cooperate and invest in each other.”
Edun emphasized the importance of mobilizing domestic resources, particularly savings, to support investment and long-term economic development.
According to Edun, rising debt servicing costs are placing an increasing burden on developing economies, limiting their ability to fund growth and social programs.
“In an environment where developing countries as a whole — what we are paying in debt service, what we are paying in terms of interest costs and repayments of our debt — is more than we are receiving in what we call overseas development assistance, and it is more than even investments by wealthy countries in our economies,” he said.
Edun added that countries in the Global South are increasingly recognizing the need for deeper regional integration.
His comments reflect growing concern among developing nations that elevated borrowing costs and global instability are reshaping development finance, accelerating a shift toward domestic resource mobilization and stronger economic ties among emerging markets.
