The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided during a special meeting to raise interest rates by 200 basis points (bps), according to a press release on October 27th.

The MPC raised the overnight deposit rate, overnight lending rate, and the rate of the main operation to 13.25%, 14.25%, and 13.75%, respectively. The discount rate was also maintained at 13.75%.

The CBE ascribed the decision to its mandate to ensure price stability over the medium term.

The bank noted that Egypt seeks to intensify its reform agenda and achieve macroeconomic stability and sustainable growth.

“To this end, the CBE moved to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the EGP against other foreign currencies, while prioritizing the primary goal of achieving price stability, and building up sustainable, adequate levels of Foreign Exchange Reserves,” the CBE said.

Moreover, the CBE announced that it will start gradually reversing the decision mandating the use of letters of credit (LCs) for import finance to be completely removed by December 2022.

Egypt is expected to suffer EGP 28 billion increase annually in debt service with each 1% increase in interest rates over the figures estimated in the general budget.

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