“The measures that the central bank took last week in hiking interest rates...goes in the right direction. It's very important to control inflation," Azour explained
Raising interest rates is a step in the right direction, and a flexible exchange rate will protect the Egyptian economy from external shocks, the International Monetary Fund’s (IMF) Middle East and Central Asia Department Director Jihad Azour told Reuters.
“The measures that the central bank took last week in hiking interest rates...goes in the right direction. It's very important to control inflation," Azour explained.
Hours prior to the announcement that Egypt and the IMF had come to an agreement for a new deal on Thursday, the Central Bank of Egypt’s Monetary Policy Committee raised key interest rates by 2% and revealed a new durably flexible exchange rate regime that saw the EGP fall against the USD at a rapid pace.
While announcing the staff-level agreement, the IMF also stated that a flexible exchange rate regime should be "a cornerstone policy" for rebuilding and safeguarding Egypt's external resilience.
"The move to a flexible exchange rate will help the Egyptian economy to be protected from term-of-trade shocks as well as external shocks, especially at a time when global financial conditions have tightened and became more challenging," Azour stated.
Azour told Reuters that the deal is expected to catalyst a large, multi-year financing package, including about $5 billion in the fiscal year ending June 2023, reflecting "broad international and regional support for Egypt."
Some Gulf states have already issued statements in support of the program, Azour revealed, stating that the $5 billion for FY2022/2023 is in addition to deposits made to the CBE by Gulf states.
"We see that through these programs there are enough financing assurances in order to cover their (Egypt's) external financing needs," he added.
