Egyptian central bank raises interest rates and cites Ukraine | Health, Medicine and Fitness
By SAMY MAGDY – Associated Press
CAIRO (AP) — Egypt’s Central Bank raised its key rate on Monday for the first time since 2017, citing inflationary pressures triggered by the coronavirus pandemic and Russia’s war in Ukraine, which have pushed up oil prices. to new records.
The move saw the Egyptian pound slide, trading at 17.5 to the dollar – compared to an average of 15.6 pounds to the dollar – after the bank’s decision. This is likely to take a heavy toll on poor and middle-class Egyptians.
The war in Ukraine has shaken the global economy and threatened food supplies and livelihoods of people around the world. Brent crude, the price basis for international oil trade, soared above $112 a barrel on Monday after nearing a high of $140 earlier in the month.
The Central Bank of Egypt raised the policy rate by 1% to 9.75%. With these increases, overnight deposit and lending rates stood at 9.25% and 10.25% respectively, the bank said.
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The increases followed an unscheduled meeting of the bank’s monetary policy committee, which was due to meet on Thursday.
Russia and Ukraine share almost a third of world wheat and barley exports. Ukraine is also a major supplier of corn and the world leader in sunflower oil, which is used in the food industry. The two countries are also a major source of visitors to Egypt, where tourism is a main source of foreign currency.
Financial ratings agency Fitch said last week that the war in Ukraine would add to Egypt’s economic strains, including “reduced tourist flows, higher food prices and greater funding problems”.
Egypt is the world’s largest wheat importer, mainly from Russia and Ukraine.
Meanwhile, Egypt’s annual inflation rate rose to 10% in February from 8% the previous month, according to the state-run statistics office.
Private bakeries have raised the price of bread produced from wheat by up to 50%, a lifeline for most Egyptians. A single loaf of bread costs 1.5 Egyptian pounds (9.5 cents), compared to 1 pound (6.3 cents). State-run bakeries still sell 20 pieces of subsidized bread for 1 Egyptian pound.
The government, in an effort to prevent runaway prices for unsubsidized bread, announced fixed prices on Monday for the next three months. Prime Minister Mustafa Madbouly has priced a 45 gram flatbread at 0.5 pounds and a 65 gram loaf at 0.75 pounds.
The government said retailers who breach the pricing system could be fined up to 5 million pounds ($286,200).
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