Central Bank of Egypt slash of discount rate reflects positive turn of economy

An Egyptian economic official described the Central Bank of Egypt (CBE)'s reduction of the discount rate on lending from 12 percent to 11.5 percent as reflective of the positive performance of the economy and the growing confidence in the Egyptian pound.

Mahmoud Mohie Eddin, CBE Board Member and Advisor to the Minister of Economy, said that the CBE's decision sends a message to the banks in Egypt to slash the interest rate on their loans with keeping the interest on deposits intact due to the low inflation rate.

"Although the decrease rate is a minor one (0.5 percent), it shows a tendency to decrease the interest on lending," he said, adding that this would not necessarily affect the growth of local savings.

Harping on the same theme, Chief of Egypt's Banks Federation Mahmoud Abdel Salam said the decision came within a framework of many actions to push forward the local market and flourish investment, as it would lead to a drop of the productive cost and a rise on the bourse dealings.

Most of the banks in Egypt voiced their support to the procedures taken by the CBE. They expected very big increase in the liquidity and funds in the Egyptian banks in the near future.

The CBE had formerly decided exempting the saving channels, set for three years or more, from the reserve-ratio deposited by the banks at the central bank; estimated to be about 15 % of their deposits.