The CBE governor, Hassan Abdallah, is attending IMF’s and the World Bank Group’s (WBG)’s annual spring meetings in Washington DC, on the sidelines of which he highlighted Egypt’s robust steps to mitigate the fallout from Covid- 19 pandemic and Russian-Ukrainian conflict. “We are ready to do more,” Abdallah said.
The CBE primarily focuses during the current period on inflation, with a target of a 7% (±2%) inflation rate by Q4 of 2026. Meanwhile, Egypt’s headline inflation has remained in double digits since the start of the Ukrainian conflict in the spring of 2022, surging to a five-year high of 32% in March 2023.
However, the core inflation rate fell below 40% in March, according to the latest announcement by the CBE.
“The CBE has been analyzing various models to understand the drivers behind our inflation figures. Our analysis shows that our inflation figures were not only driven by commodity prices but also by supply-side issues such recent backlogs in imports which resulted from previous policy regulations,” Abdallah explained.
“The CBE has not and will not hesitate to use monetary policy to tackle inflation,” he stressed.
“Since March 2022, Egypt has already raised key interest rates by a significant 1000 basis points (bps) and devalued our local currency by almost the same ratio, which was a significant step,” the CBE governor noted.
Egypt has devalued the Egyptian pound against the US dollar on three different occasions since the start of the war in Ukraine.
Currently, the US dollar is trading at around 31 EGP, which is almost twice the 16 EGP figure before the outbreak of the war.
The CBE and the Ministry of Finance are coordinating daily to integrate fiscal and monetary policies to address ongoing economic challenges, Abdallah said.
“We are working very closely with the Cabinet and we have all the support from the political leadership,” the CBE governor added.
However, he abstained from commenting on the current IMF loan program deal.
The first review of the $3 billion Extended Fund Facility (EFF) program for Egypt was scheduled to be conducted on 15 March but has not been completed to date.
On Thursday, the IMF’s Managing Director, Kristalina Georgieva, stated that the economic challenges that Egypt is facing have delayed this first review.
An Egyptian delegation is currently in Washington DC to participate in the IMF and WBG spring meetings, and also to discuss issues pertinent to the IMF’s conducting of the EFF’s first review with fund officials.
Meanwhile, during a panel discussion, also, on Thursday at the headquarters of the IMF, Abdallah said that Egypt has a solid banking system, which helped the country over the years in tackling all economic challenges.
He highlighted during the panel CBE’s efforts to improve its monetary transmission mechanism and implement measures to enhance the effectiveness of interest rates.
The monetary transmission mechanism is a process through which monetary policy decisions affect the economy in general and the price level in particular.
In this respect, Abdallah said that Egypt has moved 10% along this process, stressing that the CBE is taking measures to move further along in the process.
The CBE’s Monetary Policy Committee is scheduled to convene in May to review the key interest rates in light of the most recent economic developments on both local and global levels.
