As the cash-strapped North African nation of Egypt continues to struggle with rising inflation and a declining currency, the central bank is raising interest rates.
The overnight deposit rate, which is the most fundamental lending rate, was raised from 18.25 percent to 19.75 percent, according to a late-Thursday online statement from the bank’s monetary policy committee.
Egyptians, especially those in working-class homes, are finding it difficult to keep up with the escalating costs of living since Russia’s invasion of Ukraine last year. The Central Agency for Mobilization and Statistics, a government-run organization, said that the annual inflation rate increased to 36.8% in June from the reported 33.7% in May.
Basic goods including wheat, meat, chicken, fish, and fruit have seen sharp price increases recently.
According to the statement released on Thursday, “Given the balance of risks surrounding the inflation outlook, the MPC judges that a policy rate hike… is warranted in order to contain the inflationary pressures.”
Egypt’s central bank has raised its key interest rates during the last year in an effort to counteract increasing inflation. The most recent trek took place in March.
The majority of Egypt’s wheat imports typically come from Russia and Ukraine, making it the top importer of wheat in the world. The Egyptian pound has lost more than 50% of its value against the dollar since fighting in eastern Europe began in February 2022.
Following Egypt’s government’s announcement in October that it had struck a USD 3 billion bailout deal with the International Monetary Fund, the country’s currency decline quickened.
The Egyptian government pledged to implement various economic changes in return, one of which was a switch to a flexible currency rate.
Although the devaluation has reduced the cost of Egyptian products and boosted their worldwide competitiveness, it has also raised the cost of most imported items, including raw materials and staple foods.
According to government statistics, close to a third of Egyptians are poor.
