CBE gov: Egypt took huge actions to mitigate fallout from pandemic, Russian-Ukrainian conflict

Governor of the Central Bank of Egypt (CBE) Hassan Abdallah said Egypt has taken huge actions to mitigate the repercussions of coronavirus pandemic and the Russian-Ukrainian conflict on the national economy, asserting the country is ready to do more in this regard.

The CBE governor made statements to Ahram Online, on the sidelines of his participation in the ongoing IMF’s and the World Bank Group’s (WBG) annual spring meetings in Washington DC.

“The CBE’s primary focus in the current period is curbing inflation. We are targeting a 7 percent (±2 percent) inflation rate by the fourth quarter of 2026,” he added.

Egypt’s headline inflation has remained in double digits since the start of the Ukrainian conflict in the spring of 2022, jumping to a five-year high 32 percent in March of this year.

However, core inflation rate fell below 40 percent in March, according to the latest figures released by the CBE.

“The CBE has been analyzing various models to understand the drivers behind our inflation figures. Our analysis shows that our inflation figures were not only driven by commodity prices but also by supply-side issues such recent backlogs in imports which resulted from previous policy regulations,” Abdallah explained.

“The CBE has not and will not hesitate to use monetary policy to tackle inflation,” he stressed.

“Since March 2022, Egypt has already raised key interest rates by a significant 1000 basis points (bps) and devalued our local currency by almost the same ratio, which was a significant step,” the CBE governor noted.

Egypt has devalued the Egyptian pound against the US dollar on three different occasions since the start of the war in Ukraine.

Currently, the US dollar is trading at around 31 EGP, which is almost twice the 16 EGP figure prior to the outbreak of the war.

The CBE and the Ministry of Finance are coordinating on a daily basis to integrate fiscal and monetary policies in order to address ongoing economic challenges, Abdallah said.

“We are working very close with the Cabinet and we have all the support from the political leadership,” the CBE governor said.

However, the governor declined to comment on the current loan program deal with the IMF.

The first review of the $3 billion Extended Fund Facility (EFF) program for Egypt was scheduled to be conducted on 15 March, but has not been completed to date.

An Egyptian delegation is currently in Washington DC to participate in the IMF and WBG spring meetings, and also to discuss issues pertinent to the IMF’s conducting of the EFF first review with fund officials.

Meanwhile, during a panel discussion, also, on Thursday at the headquarters of the International Monetary Fund (IMF), Abdallah said Egypt has a solid banking system, which helped the country over the years in tackling all economic challenges.

During the panel, he reviewed the CBE’s efforts to improve its monetary transmission mechanism and implement measures to enhance the effectiveness of interest rates.

Monetary transmission mechanism is a process through which monetary policy decisions affect the economy in general and the price level in particular.

In this respect, Abdallah said that Egypt has moved 10 percent along this process, stressing that the CBE is taking measures to move further along in the process.

The CBE’s Monetary Policy Committee (MPC) is scheduled to convene in May to review the key interest rates in light of most recent economic developments on the local and global levels.