When on 16 March the Central Bank of Egypt (CBE) decided to cut interest rates by three per cent, it took the market by surprise. The move meant the deposit rate, overnight lending rate, and main operations rate fell to 9.25 per cent, 10.25 per cent, and 9.75 per cent, respectively. While the cuts were intended to support the economy amidst the challenging environment posed by the Covid-19 threat, it was a shock to individuals who depend on their savings for a living. Taher, 70, a retired engineer who worked for a state-owned company, was one of those people, and the cuts directly affected his financial position. “My monthly pension does not cover my living expenses, so I depend on the interest I receive every few months from the savings certificates I have,” he said. Taher added that at one point he was getting 17 per cent interest on his certificates, and to see that fall to around 10 per cent or less was a “catastrophe”. He had been relieved when he had heard the National Bank of Egypt (NBE) and Banque Misr were issuing certificates at a 15 per cent interest rate. “I immediately applied for them. We are passing through tough times because of the coronavirus, and I badly need the money,” Taher said. The new certificates have been a hit with many other people since their announcement in late March. Over LE50 billion worth of certificates have been sold by the two banks. While the new certificates have been a relief to individuals like Taher, experts say their issue was also to guard the market against dollarisation and to encourage Egyptians to hold onto their pounds. The 15 per cent interest rate is the highest currently offered by Egyptian banks. However, demand for the new certificates has also led to people clamouring at the banks to withdraw money from their other bank accounts, Ihab Al-Dessouki, head of the economics department at the Sadat Academy for Administrative Sciences in Cairo, told Al-Ahram Weekly. Their appearance coupled with uncertainty about how the Covid-19 crisis could develop has pushed individuals to rush to the banks to withdraw large sums of money. Having seen the rush, the CBE decided to place a limit on cash withdrawals and deposits from banks and ATMs. Companies can now withdraw only LE50,000 per day, and individuals can withdraw or deposit only LE10,000 in a single day. For ATM withdrawals and deposits, there is a cap of LE5,000. These limits on cash have caused some to experience further worries, Al-Dessouki noted. Both adults and minors can take out savings certificates to a minimum value of LE1,000 under the new scheme. The end date for the issuing of the certificates has yet to be announced, though it will likely be some time away. For Mahmoud, 25, a Cairo resident, the announcement of the new 15 per cent certificates has been great news. “I work for a multinational company in an administrative position. There is a lot of uncertainty about my future in the company amid the coronavirus outbreak, and I have a lot of financial commitments to meet in the coming months. Putting my savings in one of these certificates will make the situation less problematic,” he explained. Yehia Abul-Fotouh, NBE's deputy chairman, said that his bank continued to receive new requests for the one-year certificates through electronic and non-electronic methods, including mobile, Internet, or phone banking. Speaking to Egypt's state-owned MENA news agency, Abul-Fotouh said that such online tools could prevent the spread of infection amid the global outbreak of the novel coronavirus. Banque Misr has adopted similar policies. Adults can use the certificates as collateral for bank loans or credit cards, and the certificates can be cashed in after six months. *A version of this article appears in print in the 16 April, 2020 edition of Al-Ahram Weekly
