Egypt Holds Interest Rates at Record High Amid Key IMF Review

AFRICAN BUSINESS AND ECONOMYNovember 22, 2024 at 10:38 AM UTC

TLDR

Egypt's central bank maintains record high interest rates at 27.25% for deposit and 28.25% for lending to assess subsidy cuts and await IMF review.
Decision aligns with economist expectations; central bank raised rates earlier in the year but paused further hikes amidst 9.2% fuel price increase in October.
Inflation at 26.5% in October, expected to rise further in November due to higher fuel and cigarette prices; IMF cites progress in discussions for unlocking $1.3 billion loan tranche.

Egypt’s central bank held interest rates steady at a record high, keeping the deposit rate at 27.25% and the lending rate at 28.25%, as it assesses the impact of recent subsidy cuts and awaits the completion of an International Monetary Fund (IMF) review. The decision aligns with expectations from economists surveyed by Bloomberg.

The central bank has raised rates by 8 percentage points earlier this year, but paused further hikes amid October’s 9.2% average increase in fuel prices, part of an IMF-backed reform program aimed at reducing subsidies. Inflation stood at 26.5% in October, slightly up from 26.4% in September, with further acceleration expected in November due to higher fuel and cigarette prices.

The IMF recently noted “substantial progress” in discussions during its Cairo visit but stated that additional talks are needed. Passing the review would unlock a $1.3 billion loan tranche, a critical part of Egypt’s $8 billion reform program.

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Key Takeaways

Egypt’s rate hold underscores its balancing act between curbing inflation and meeting IMF requirements. While maintaining high rates stabilizes government finances amid subsidy reductions, persistent inflation pressures complicate monetary policy. Securing the IMF tranche is crucial for bolstering foreign reserves and economic stability. Markets now await clearer signals on the timing of Egypt’s monetary easing cycle, expected no earlier than Q1 2025. The decision reflects cautious policymaking amid fiscal and inflationary challenges.

Egypt

Inflation

Interest Rates

Economy

IMF