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- Citing inflation and rising oil prices due to Russia-Ukraine war, Egypt raises interest rates
Egypt’s Central Bank raised its key interest rate Monday for the first time since 2017. It has cited inflationary pressures triggered by the coronavirus pandemic and Russia’s war in Ukraine, which hiked oil prices to record highs as the reasons for raising the key interest rates.
As a result, the Egyptian pound slipped, trading at over 18 to the dollar by midday (Monday, March 21) — up from an average of 15.6 pounds for US$1. Oil prices zoomed high creating a cascading effect across the economy. The war in Ukraine has hit hard on many nations. Brent crude spiked over US$112 per barrel on Monday .Oil prices, a few days ago, reached a peak of US$140 earlier this month.
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This forced the Central Bank to increase the key interest rate by 100 basis points to reach 9.75%, up from 8.75%. The overnight deposit and lending rate were also raised by 100 basis points each to reach 9.25% and 10.25% respectively.
Experts feel that the increases in interest rates and a devaluation of the Egyptian pound could be precursors to securing a new financing package from the International Monetary Fund. There are reports that Egypt is seeking fresh aid from the multilateral lending agencies. Nearly a third of the world’s exports of wheat and barley are done by Russia and Ukraine. Egypt’s tourism industry is largely dependent on visitors from these two countries.
