Monetary policy committee at Central Bank of Egypt (CBE) plans to reduce lending and deposit rates “Corridor rate”, on in its meeting on next Thursday, after being fixed for the last three years, sources said.
This move came after International Monetary Fund mission had conditioned its US$ 3.2 billion loan to Egypt on reducing interest rates so as to boost investments.
Sources added that CBE’s decision to reduce the proportion of reserve requirement on domestic deposits with about 200 basis points, falling from 14% to 12%, is made to support this step.
This decision will boost Egypt’s economy in the upcoming period as this will reduce the country’s local debt which is more than trillion pounds, as it increased as a result of reducing returns on governmental debt instruments (treasury bills and bonds) to 16%. Sources said that this decision will also boost investments after being stopped as a result of the continual increase in loans costs.
If CBE reduced interest rates, young investors will not withdraw their deposits as the current interest rate is “appropriate” and that banks are currently the most riskless investment, sources added.
In its last meeting, CBE’s monetary policy committee fixed overnight deposit and lending rates at 9.25% and 10.25% respectively as well as credit and discount rate at 9.5%.
Corridor rate was raised once on last November 24th , the first time after 17 successive fixations.
