Bloomberg News

Egypt Central Bank Leaves Benchmark Interest Rate Unchanged

May 03, 2012

Egypt’s central bank left its key interest rates unchanged as the economy struggles after more than a year of unrest.

The Monetary Policy Committee left the overnight deposit rate at 9.25 percent and the overnight lending rate at 10.25 percent, the central bank said today on its website. All seven economists surveyed by Bloomberg anticipated the move.

Investment hasn’t recovered as political instability persists after the revolt that forced Hosni Mubarak from power in February last year. The bank has kept rates on hold since an increase in November that some economists saw as an effort to avert a run on the Egyptian pound as the country’s currency reserves plunged.

Reserves “are still at dangerously low levels, and if political conditions get worse, they could start to fall rapidly again,” Said Hirsh, London-based Middle East economist at Capital Economics Ltd., said in response to e-mailed questions. “Last year’s hike did nothing to stop capital outflows.”

Net international reserves dropped to $15.1 billion at the end of March and have fallen almost 60 percent since the start of 2011. Economic growth slowed to 0.4 percent in the final quarter of 2011.

Egypt requested a $3.2 billion loan from the IMF in January. Talks have yet to conclude and the IMF said yesterday that Egypt has yet to mobilize enough political support for an economic program that will form the basis of the loan accord.

The Muslim Brotherhood’s Freedom and Justice Party, the largest bloc in parliament, is demanding the ouster of the military-appointed government and says it shouldn’t be the recipient of IMF money.

The dispute has added to political tensions, including violent clashes in Cairo this week, as the country prepares for its first presidential elections since Mubarak’s departure. The vote is due to start on May 23, and the ruling generals say they will hand over power after its completion next month.

To contact the reporter on this story: Mariam Fam in Cairo at mfam1@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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