Egyptian economist Karim El-Omda confirmed that Egypt is tightening monetary policy to curb inflation and reduce demand for loans.
Al-Omda said in RT statements, commenting on the decision of the Central Bank of Egypt to raise the interest rate by 300 points at once, that he raised the interest rate by a large rate of 3%, and we regard this as a tight monetary policy, and when the inflation rate is high, to such a step is resorted to by central banks and all countries of the world, not only Egypt. banks and at the same time reduce borrowing to ease the demand for goods and products and thus slow down inflation, because it is important to stop inflation.
He added that inflation in Egypt has reached 19%, which is a record, and inflation needs to be curbed. In addition, the interest rate increase is temporary, not permanent, indicating that there are many other things besides the interest rate increase, such like borrowing to buy dollars.
He noted that there are citizens who prefer not to invest their money in banks in order to save their value, but to buy the dollar and abandon the national currency, and this causes a big crisis, which is the loss of confidence in the Egyptian pound and its solution can be difficult. .
He demanded the need for a flexible exchange rate and went on to say that dollar speculation had reached its peak in the last two weeks, and with the increase in the supply of dollars in the hands of individuals, interest rates should be raised. .
He said that the purpose of the dollar’s fall is to approach its official price in banks, and the basis is the degree of its availability, the return of economic activity and the release of exports or not, stressing that the price of the dollar depends on its availability, and if the dollar is available, its price will decline, and if it is not, then the upward cycle will return, it will not have a price ceiling.
For his part, Egyptian economist Mostafa Abdel Salam said that if we take Finance Minister Mohamed Maite’s figures, in which he said a few days ago that every 1% increase in the interest rate entails 32 billion pounds for the state budget, then adopted today the central bank’s decision would raise the cost of government debt by about 96 percent. £1 billion a year worldwide. Fighting high inflation and high prices and maintaining the stability of markets, including the foreign exchange market, outweighs any economic and financial considerations, even if an increase in the interest rate negatively affects the rate of economic growth and increases the level of public debt.
He continued: “Egypt’s central bank was late in raising interest rates despite the currency crisis and the fall in the value of the pound due to pressure from the finance minister and others, but better late than never.”
Cairo – Nasser Hatem