Egypt raises interest rates, sets fixed bread prices against global inflationary pressures-Xinhua

Egypt raises interest rates, sets fixed bread prices against global inflationary pressures

Source: Xinhua

Editor: huaxia

2022-03-21 23:27:56

People are seen outside a foreign exchange office in Cairo, Egypt, on March 21, 2022. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)

CAIRO, March 21 (Xinhua) -- The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic.

At a surprise meeting, the Monetary Policy Committee of the Central Bank of Egypt (CBE) decided to raise key interest rates by one percent. This is the first time Egypt has raised rates since 2017.

The overnight deposit and lending rates were both raised by 100 basis points to 9.25 percent and 10.25 percent respectively, according to a central bank statement.

Soaring commodity and energy prices have added strain on the economy of Egypt that targets a inflation rate of 7 percent (±2 percentage points) for the fourth quarter of 2022, the statement noted.

According to official statistics, the annual headline inflation in Egypt rose to 10 percent in February from 8 percent in January because of the rise in food prices.

"Achieving low and stable inflation rates in the medium term is a prerequisite for supporting the purchasing power of the Egyptian citizens and achieving high and sustainable growth rates," the statement said.

On Monday morning, the trading price of one U.S. dollar against one Egyptian pound jumped to 17.5 pounds for buying and 17.4 pounds for selling, after having stabilized at around 15.6 pounds for two years, according to the National Bank of Egypt.

"The CBE is committed to safeguarding the achieved macroeconomic stability, and highlights the exchange rate flexibility as a shock absorber to preserve Egypt's competitiveness," said the CBE statement.

Meanwhile, the Egyptian cabinet said it has set a fixed price for unsubsidized bread for three months in an effort to ensure food security for those who mainly depend on bread in their meals.

Under the new pricing system, the price of a 45-gram flat loaf is sold at 0.5 pounds, a 65-gram loaf at 0.75 pounds, and a 90-gram loaf at one pound, while packaged bread sold in supermarkets and grocery stores is priced at 11.5 pounds per kg, according to a cabinet statement.

Retailers who do not comply with the new pricing system or hoard commodities will face a fine of 100,000 pounds (5,714 dollars) to 5 million pounds (285,714 dollars).

The price of subsidized bread has remained unchanged in Egypt for decades. About 60 percent of the 102 million people in Egypt live on the bread allocated under the subsidized food card system, which costs only 0.05 pounds a loaf.

The bread consumption per capita in Egypt is 150 to 180 kg a year, nearly three times of the global average, according to official statistics.

 

A woman walks past a foreign exchange office in Cairo, Egypt, on March 21, 2022. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)

Photo taken on March 21, 2022 shows the building of the Central Bank of Egypt in Cairo, Egypt. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)

People use ATMs in Cairo, Egypt, on March 21, 2022. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)

People walk past a foreign exchange office in Cairo, Egypt, on March 21, 2022. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)

A man bicycles past the building of the Central Bank of Egypt in Cairo, Egypt, on March 21, 2022. The Egyptian government on Monday introduced new economic measures to absorb shocks from the global inflationary pressures caused by the Russia-Ukraine conflict and lingering COVID-19 pandemic. (Xinhua/Ahmed Gomaa)