CBE Fixes Interest Rate For The Second Time In 2012

Monetary Policy Committee of Central Bank of Egypt (CBE) decided in its meeting on Thursday to fix deposit and lending rates at 9.25% and 10.25% respectively, repo rate at 9.75% and credit and discount rate at 9.5%.

This is the second interest rate fixation after MPC raised interest rate in 2011 after being fixed for two successive years.

The Monetary Policy Committee decision was supported by a number of bankers and due to the absence of events which may have a significant influence on the Committee’s decision, stating that raising interest rates will contribute to a higher cost of lending and higher interest rates on debt instruments of government treasury bills and government bonds, increasing burdens of the domestic debt which exceeded trillion EGP.

Amal Qotb, head of Asset, liability at Union National Bank, said the stability of interest rates was expected, adding that raising interest rates will lead to higher cost of lending, which would have a negative impact on investment flows into the Egyptian market in a time where new investments will greatly support growth rates as well as securing foreign currency to face successive foreign exchange reserves decline.

Alaa Samaha, Finance Minister Consultant and former President of Bloom Bank, affirmed that CBE’s decision came in time, adding that the current period is witnessing an increasing domestic debt, which urges to reduce interest rates on deposit and lending.