CAIRO: Egypt's Central Bank has kept the country's interest rates at the same level, in the hopes it can help spur more economic activity in the country after months of turmoil. According to the bank, it maintained deposit and lending rates at 9.25 percent and 10.25 percent, respectively. The move is aimed at ensuring the cost of government debt does not rise too high and also to attract investment to the country, which has been hit hard since the January 2011 uprising by economic struggle. “The overnight rates are high enough to combat foreign exchange fluctuations. Despite a rise in the Euro here, the US dollar has been around LE6.05 for several months. The CBE's monetary policy has so far been balanced,” Suheir Wagih, an economist at the Cairo-based Future Investment Consultants, told local government-run newspaper The Egyptian Gazette. It also comes as foreign exchange rates in the country continue to see rises, with the euro topping the 8 Egyptian pound mark and the US dollar now securely above the 6 Egyptian pound mark. Before the uprising, the dollar was well below the 6 pound mark. The rates are also inclined to help the bumbling tourism market, which has seen massive declines in the past 12 months. Foreigners just aren't coming. According to recent government statistics, tourists have dropped by some 30 percent in the past year. As the Government needs liquidity to bridge the gap in its budget deficit estimated at LE144 billion ($24 billion) in the fiscal year 2011/2012, it will issue more treasury bills and bonds, according to Wagih. Egypt's fiscal year begins on July 1. “The Finance Ministry will issue treasury bills and government bonds to balance the gap in the State budget. The Government has an obligation to repay these debts at maturity dates,” she said, adding that the failure to receive a $3.2 billion loan from the International Monetary Fund (IMF) would increase Egypt's debt risks. “Keeping the rates stable will also attract more cash into local banks and increase the deposits. The move will boost the investment climate; local banks will have more funds to offer to investors,” Wagih explained. “The raising of interest rates could increase bank deposits, but it would not guarantee an increase in investments. The bank loan to deposit ratio stands at around 50 per cent in Egypt. In other developing countries, the ratio averages 70-80 per cent,” Wagih said. Inflation in Egypt continues to skyrocket as well, with some estimates putting overall inflation at or above 25 percent. BM ShortURL: http://goo.gl/RfGCw Tags: Central Bank, debt, Economy, Egypt, Interest Rates Section: Business, Egypt, Latest News
