{"id":664022,"date":"2025-04-18T00:00:00","date_gmt":"2025-04-18T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2025\/04\/18\/central-bank-of-egypt-cuts-interest-rates-by-225-bps\/"},"modified":"2025-04-18T00:00:00","modified_gmt":"2025-04-18T00:00:00","slug":"central-bank-of-egypt-cuts-interest-rates-by-225-bps","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2025\/04\/18\/central-bank-of-egypt-cuts-interest-rates-by-225-bps\/","title":{"rendered":"Central Bank of Egypt cuts interest rates by 225 bps"},"content":{"rendered":"

Happy Easter, everyone. <\/strong>The public and private sectors are getting<\/a> two days off next week \u2014 Monday for Sham El Nessim and Thursday for Sinai Liberation Day. Bankers will also be taking the two days off<\/a> in addition to Sunday in observance of Coptic Easter.<\/p>\n

That includes us too: <\/strong>EnterpriseAM Egypt will be taking a break from your inbox on Sunday, Monday, and Thursday next week.<\/p>\n

Tired of your smartphone monopolizing your time with a constant stream of notifications<\/strong> and distractions? <\/strong>In today\u2019s hyperconnected world, the ultimate luxury isn\u2019t the latest smartphone \u2014 it\u2019s the freedom from one. Transition to a simpler mode of communication, eliminate all the digital noise, and reclaim your focus by downgrading to a dumb phone (maybe only part-time). <\/p>\n

LAST WEEK IN 3 MINS-<\/p>\n

ECONOMY-<\/strong><\/p>\n

The Central Bank of Egypt cut interest rates by 225 bps in its second meeting of the <\/strong>year <\/strong>on Thursday<\/strong>, the bank said in a statement (pdf)<\/a>. The move marks the Monetary Policy Committee\u2019s first change to the policy rates since March 2024<\/a>, following seven consecutive meetings where rates were held steady<\/a>. \u201cThe sharp decline in annual headline inflation\u201d in 1Q 2025 created \u201cample room for commencing the easing cycle,\u201d the bank said.<\/p>\n

Where rates currently stand: <\/strong>The overnight deposit rate stands at 25.0%, the overnight lending rate at 26.0%, and the main operation and disc. rates at 25.5%. <\/p>\n

Most analysts saw this coming:<\/strong> Most economists and analysts we polled<\/a> this week expected the MPC to cut rates by at least 200 bps, while others gave a more conservative estimate of a 100 bps cut.<\/p>\n

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Annual headline urban inflation <\/strong>hit 13.6% in March<\/a><\/strong>, marking an 0.8 percentage point increase from the 12.8% recorded in February<\/a> and ending a four month-long downward trend. On a monthly basis, inflation edged up by 0.2 percentage points to 1.6%.<\/p>\n

Food and beverage price inflation drove the trend<\/strong>, with the segment rising 2.9 percentage points to 6.6% in March.<\/p>\n

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Remittances from Egyptians abroad continued their <\/strong>upward pace<\/a><\/strong> at the start of the year<\/strong>, rising 83.2% y-o-y to USD 2.9 bn in January \u2014 the highest figure ever recorded during the month. The numbers are similarly positive in the longer term, with the first seven months of the current fiscal year having seen an 81.0% y-o-y increase in remittances to some USD 20 bn. Remittances are also expected to continue increasing throughout the year, with Morgan Stanley forecasting USD 32 bn in inflows by the end of the fiscal year.<\/p>\n

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S&P Global Ratings <\/strong>trimmed<\/a><\/strong> Egypt\u2019s outlook to stable from positive<\/strong> and maintained its B-\/B rating for Egypt\u2019s long- and short-term local and foreign currency debt. The ratings agency pointed to high debt-servicing costs and a still-vulnerable external position amid heightened global market volatility<\/a> and geopolitical risk<\/a>.<\/p>\n

Fitch Ratings also maintained its stable outlook for the country\u2019s credit rating at B <\/strong>\u2014 five notches into junk territory.<\/p>\n

LEGISLATION-<\/strong><\/p>\n

The House <\/strong>passed<\/a><\/strong> Egypt\u2019s long-awaited Labor Act<\/strong> after years of back-and-forth between the government, parliament, business groups, and labor unions. The law makes open-ended contracts the default, sets minimum annual raises at 3% of insured wages, introduces modern work formats including remote and part-time work, and sets forth provisions for work hours and leave entitlements, among a raft of other regulations.<\/p>\n

INVESTMENT-<\/strong><\/p>\n

President Abde<\/strong>l Fattah El Sisi <\/strong>wrapped<\/a><\/strong> his Qatar trip with a big investment agreement<\/strong>, which saw the Gulf state further cement warming relations by agreeing to work towards a USD 7.5 bn package of direct Qatari investments in Egypt in the near future. The announcement \u2014 which didn\u2019t provide any further details of the investment plan \u2014 followed talks between El Sisi and Qatari Emir Sheikh Tamim bin Hamad Al Thani.<\/p>\n

M&A WATCH-<\/strong><\/p>\n

Private equity giant Development Partners International (DPI) has <\/strong>taken over<\/a><\/strong>management of Nclude\u2019s USD 105 mn in AUM<\/strong> under a fund restructuring transaction between the Africa-focussed firm and the local fintech-focused VC. As general partner, DPI will both run Nclude\u2019s existing investments and make investment decisions going forward.<\/p>\n

DPI taking over Nclude is a significant vote of confidence in the Egyptian economy.<\/strong> The London-based PE firm is a no-BS investor that has AUM of c. 3.1 bn and co-investments across three funds in Africa. That includes some USD 850 mn it has invested here over the last decade in big local names including MNT-Halan and Kazyon.<\/p>\n

FINANCE-<\/strong><\/p>\n

The Industry Ministry <\/strong>launched<\/a><\/strong> the first phase of a new EGP 30 bn financing initiative <\/strong>offering reduced 15% interest rates to seven priority industrial sectors<\/strong>. The initiative will target pharma, food, engineering, chemicals, textiles, mining, and building materials private sector projects and cover machinery, equipment, and production lines at the discounted rate for five years.<\/p>\n

BUDGET WATCH-<\/strong><\/p>\n

Finance Minister Ahmed Kouchouk <\/strong>delivered<\/a><\/strong> his budget statement to the House<\/strong>, giving us the first proper look at the draft state and public government budgets for the next fiscal year. <\/p>\n

Interest spending is set to make up the majority of the government\u2019s total expenses<\/strong> with some 50.2% of its total spending (EGP 2.3 tn), with subsidies coming in second place with 16.2% (EGP 742.5 bn). This is followed by wage payments (14.8%) with EGP 679.1 bn allocated.<\/p>\n

As for subsidy spending:<\/strong><\/p>\n