Egypt seeks economic haven from coronavirus threat

A 3% interest rate cut by the Central Bank of Egypt and a financial lifeline worth 20 billion Egyptian pounds ($1.27 billion) have lifted Egypt’s equities over the past week. However, the positive effects may be short-lived if the COVID-19 crisis persists.

The central bank cut interest rates March 16 by 3%, aiming to revive the local stock market, which has been battered by massive selloffs since March 2, after Egypt reported its first coronavirus case Feb. 14. The overnight deposit and lending rates now stand at 9.25% and 10.25%, respectively, according to the bank’s website.

Mohabeldeen Agena, head of technical analysis at the Cairo-based investment bank Beltone Financial, told Al-Monitor, “The rate cut is a positive move for boosting the economy in general. The central bank’s Monetary Policy Committee has taken the preemptive step to withstand any negative impacts inflicted by the coronavirus. We may say this is an anti-recession move.”

Agena said the rate cut will help soften a downturn that is expected to worsen. “We can’t see [the full] immediate fruitful results from the rate cut now. We should be aware that this is an exceptional circumstance. The move would have a greater effect if economic conditions were normal. The slump caused by the COVID-19 concerns has made it necessary,” he said.