The International Monetary Fund( IMF) has called on the Central Bank of Egypt to cancel all low-interest initiatives, such as loans to small and medium enterprises, the tourism sector, and real estate financing, stressing the need for unified interest rates in the banking market,” according to three government sources who spoke to “Al-Sharq.”
Egypt talks with the International Monetary Fund since last March about possible support that could include a new loan, as the shocks caused by the war in Ukraine add pressure on the country’s economy. This is the first time that negotiations have dragged on to this extent without announcing a final agreement.
The interest rates in Egypt, on overnight deposits, on overnight lending, and on the main operation rate, are 11.25%, 12.25%, and 11.75%, respectively. While the real interest rate in Egypt – that is, the nominal interest rate minus the inflation rate – is at negative 1.35%.
According to the latest data, Egypt’s repayable obligations this year are estimated at about $20 billion, of which 8.3 billion are due in the second half of 2022.
During the last six years, Egypt has launched a number of initiatives with low-interest financing, such as financing the tourism sector with a subsidized interest rate of up to 8%, small projects with an interest rate of 5%, medium-sized projects, and the industrial and agricultural sector at an interest rate of 8%, and real estate financing activities with an interest rate ranging between 3 % for low-income and 8% for middle-income.
In late 2016, Egypt began implementing a three-year program with the IMF, which included a $12 billion loan, coinciding with a sharp currency devaluation and a reduction in subsidies. In 2020, Egypt obtained from the fund, under a credit standby agreement, $5.2 billion, in addition to $2.8 billion under the rapid financing instrument, which helped the authorities deal with the impact of the repercussions of Corona.
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Central Bank of Egypt officials did not respond to requests from Al-Sharq for comment regarding the Fund’s request to unify interest rates during the ongoing negotiations.
However, when Finance Minister Mohamed Maait was asked about the issue by Al-Sharq, he confirmed that “the initiatives announced by the state to support the economy continue, regardless of who manages it or bears its burdens,” without going into further details.
Source: Al-Sharq Business
