Let's suppose that a certain commodity was sold in Cairo last August for LE 100 before the global financial crisis and the same commodity was sold in London for 10 pounds sterling which equals LE 120, but when the crisis erupted, matters changed for the two commodities. This commodity's price in London went down to eight pounds sterling. So its price equaled LE 96 and its price declined due to a retreat in the pound sterling value due to the global crisis. And then under an English Central Bank decree, the interest rate of the pound sterling was reduced. But all this happened while in Egypt the commodity's price did not change because the Egyptian pound value did not decline and its interest rate remained unchanged! What does this mean? It somehow means that the domestic commodity became in a weak position in its competition with other commodities which equaled it in price when the crisis started. The fact that the domestic commodity's price remains at its level before and after the crisis due to zero changes to the interest rate of the Egyptian pound also means a serious threat to the commodity and implied negative impacts on consumers in the country! And this is not the end of the story. The negative impact also extends to services. Travel agencies, for instance, would have to compensate interest rates on loans they get from banks by raising the price of the service they offer to tourists, which means loss at all levels and each investor and businessman would think a thousand times before he invests money in Egypt due to the interest rate on the Egyptian pound. I just guess that. And it is some kind of common people's guessing that may be right and may be wrong. I have demanded the Central Bank of Egypt several times to accept the government request to reduce the interest rate. That was my own demand which I built upon this guessing. However, there is another viewpoint by specialists and experts. And since the global crisis started and clash of viewpoints between the government and the Central Bank president, I have been always discussing the details of the issue with several people; on top of them was the former chairman of the National Bank of Egypt, Mahmoud Abdel Aziz. That man, in his vision to the whole matter, was totally biased for the Central Bank president's viewpoint for reasons he deemed very objective. Inflation rate, for example, which nears 21% currently, prevents the bank from reducing the interest rate because cutting it means that 60% of Egyptians, almost limited-income and poor, would shoulder the negative impacts of such a decision. And if each citizen saves LE 100 at an interest rate of 11% in any bank, a reduction in interest rate while inflation rate is the same means that each person will lose LE 10 out of his LE 100 and these ten pounds are the differential between an interest average of 11% and the inflation rate of 21%! It is that loss that forces the bank to insist on its position. But the President is determined to cut interest rates and is pressing the bank to do so. It would be better to cancel the Supreme Council for Monetary Policies if it does not have a powerful presence in this crisis. Otherwise, when it would convene and coordinate if a big crisis like that does not move it to convene?
