Egyptian economist attributes reduction in interest rate to rising costs
Date
10/10/2024 4:02:58 AM
(MENAFN) Economic expert Hani Abu Al-Fotouh has pointed out that the reduction in the interest rate on three-year dollar savings certificates at the National Bank of Egypt is primarily due to rising costs. This adjustment comes in the context of the U.S. Federal Reserve lowering interest rates by 0.5 percent, which has established a new benchmark for banks regarding their lending and savings rates.
In his statements to Al-Ahram Gate, Abu Al-Fotouh emphasized that the high costs associated with maintaining these dollar certificates are the main factor driving the government's decision to reduce interest rates. However, he also expressed concern that this decision contradicts the original goals of issuing these certificates, which were designed to attract dollar liquidity from both Egyptians living abroad and those withdrawing funds from the local market.
The primary objective of these dollar savings certificates was to provide an incentive for depositors by offering attractive returns on dollar deposits in Egyptian banks. By doing so, the government aimed to boost foreign currency reserves and stabilize the local economy. However, the reduction in interest rates may hinder these efforts and make it less appealing for depositors to invest in dollar certificates.
Abu Al-Fotouh’s analysis raises important questions about the effectiveness of the current monetary policy and its alignment with the overarching economic goals. As the landscape of global interest rates evolves, maintaining competitive rates on dollar savings certificates will be crucial for attracting the desired dollar liquidity that the Egyptian economy requires.
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