New monetary policy to achieve interest rate flexibility, says CBE chairman

The new monetary policy in Egypt is designed to turning the Central Bank of Egypt (CBE) from the containment role dealing with its intervention in the monetary market into an active and positive role to achieve flexibility in the interest rate, said CBE chairman Mahmoud Abul Eyoun.

ÊÊÊ Abul Eyoun said Wednesday that the relations between Egypt and the International Monetary Fund (IMF) were based on mutual respect and consultation.

ÊÊÊ In an interview with Egyptian economic editors, Abul Eyoun asserted that Egypt did not toe the line of the IMF, pointing out that all economic reform programmes were pure Egyptian.

ÊÊÊ Abul Eyoun said the period of economic downturn is an opportunity for putting into effect the policies of economic reform, asserting that it is a policy pursued by all countries.

ÊÊÊ The monetary policy is designed to achieve full flexibility in the interest rates and prevent any administrative and constitutional hurdles prejudicing its flexibility on the short and medium terms, he added.

ÊÊÊ He also added that the new policy depends on transparency in management and reconsidering the regulations of the current monetary policy.

ÊÊÊ The policy aims to achieve three main targets: providing accurate and sufficient information at the right time and curbing contradiction and duplication of duties among various departments of the CBE, said Abul Eyoun.

ÊÊÊ He pointed out that for the first time in Egypt the CBE is reviewing its views on Egypt's future monetary policy and is now playing an active role in the money market.

ÊÊÊ Egypt has to reconsider its monetary policy for a number of reasons including what is happening on the international market and its impacts on the local economy, said Abul Eyoun.

ÊÊÊ The Egyptian economy has been badly affected by the 1997 turmoil in Asia that led to a sharp decrease in the volume of short-term foreign investments in the stock exchange, he explained.

ÊÊÊ He added that a decrease in the exchange rate of currencies of Asian countries had encouraged their exports.

ÊÊÊ Egyptian imports from Asia in 1997/98 were estimated at 16.9 billion, with an increase of $ 1.2 billion compared to 1996.

ÊÊÊ This has affected Egypt's trade balance negatively. He added that the new monetary policy would stop sudden changes in the interest rates to streamline economic performance.