Experts: Reducing Interest Rates Is An Urge To Boost Foreign Investment

Money market experts demanded reducing interest rates in Egypt so as to increase foreign investments that will in its turn raise economic growth rates and decrease unemployment rate.

Investment in Egypt is in need to be bolstered so as to withstand the current unstable conditions.

Mohamed Taymour, chairman of Egyptian Capital Market Association (ECMA), recommended the reduction of interest rate, as the high interest rate is one of the most affective obstacles hindering Egypt’s economy as it is posting a negative impact on Egypt’s stock market and investment.

Hindering stock market and investment will slow down growth rate and increase unemployment rate. Because of the lack of foreign investment and contraction in local investment, there is an urge to reduce interest rate.

Ashraf Salman, chairman of Cairo Capital for Financial Investment, said that the current high interest rate shall be reduced as it is bringing negative impacts on investments and growth rate in Egypt.

Hussein El-Sherbiny, managing director at Pharos Holding, also stressed on the importance of lowering interest rate, as the current high interest rate is decreasing the opportunities of injecting foreign and local investments in Egypt.

A research performed by CI Capital expected that CBE’s Monetary Policy Committee will fix the interest rate in its meeting today. Egyptian government plans to increase local debt through allowing banks to invest more in treasury bills, so as to repay government’s debts and increase investments.

Raising local debt together with the increase in interest rate will increase the burden on Egypt’s budget. Negative macroeconomic indices will accordingly affect negatively Egypt’s investment.

Foreign investment in treasury bills retreated to 2.2% in December 2011, compared with 22% in December 2010. Foreign investment portfolio reached US$ 2.6 billion in FY 2010/2011. Direct foreign investment declined to US$ 2.1 billion.

CBE’s Monetary Policy Committee decided to fix deposit and lending rates at 9.25% and 10.25% respectively and fix the Repo rate at 9.75% as well as credit and discount rate at 9.5% at the beginning of last February.

This is the first decision to fix interest rate after lending and deposit rates are raised by Monetary Policy Committee in 2011 after being fixed for two successive years.