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Raising Interest Rates: Why Egypt Is Turning to This Option and What Experts Say – RT Exclusive

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Egyptian economist Ahmed El-Sayed El-Naggar told why the Central Bank of Egypt may resort to raising interest rates today, Thursday, after the inflation rate rose.

He said that the inflation rate (the growth rate of consumer prices), according to official data, rose to 32.9 percent last month, which means that the current interest rate on deposits, which ranges from 16 to 17.5 percent, is actually a negative interest rate with a rate equal to the difference between the inflation rate and the interest rate, that is, about -16.9%, or -15.4% in the same month!! If we take the average annual inflation rate, then the interest rate remains below it, i.e. negative.

Al-Najjar pointed out in statements to RT that if a positive interest rate stimulates saving, then a negative interest rate stimulates consumption and fuels a further increase in the inflation rate, the rise of which leads to increased poverty and poverty of the middle class and rich wealth.

And he continued: “I would prefer that the power (president, government and state agencies, i.e. loans to finance the necessary investments to achieve growth and hire workers, as well as to revive the money market and move the stock market inflation, so there is a positive interest rate on family sector deposits, which account for nearly three-quarters of deposits in the banking system globally and locally.

He noted that a large class of local and foreign capitalists, raising the prices of their products and imports of goods and services and causing an increase in inflation, to which the government contributes the largest share, depreciating the exchange rate of the pound sterling against the dollar and the subsequent increase in the prices of all imported and local goods, as well as by increasing energy prices … in this class and with it. Both governments want to keep interest rates low in order to borrow at low cost as they are the main borrower from the banking system.. extremely greedy indeed.

Al-Najjar emphasized that the central bank should have clearly raised the issue with the government and businessmen. Either you work to reduce the inflation rate (the growth rate of consumer prices), then we will lower interest rates for you so that they are slightly higher than the inflation rate, so that there was a real positive benefit to encourage savings and protect the rights of the class. The central bank, represented by the main savings family sector in the banking system, or you will continue to raise prices and exploit consumers, and the Central Bank will have no choice but to raise the interest rate to keep it positive and encourage savings in a country that is suffering from a shockingly low savings rate of 10.2% of GDP Total in 2021/2022 due to the state budget deficit, noting that the average global savings rate is about 22% of world production, and the rate reaches more than 40% in the developing countries of the Far East and more than 30% in middle-income countries, one of which is Egypt.

In the end, he pointed out that the central bank has no choice but to raise the interest rate to the average annual level of real inflation, at least to fight inflation and achieve some equity for family-sector savers.

Source: RT

Cairo – Nasser Hatem

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