The financial group, "Hermes," revealed that the Central Bank of Egypt's decision to reduce interest rates was an expected decision because there was a significant decline in interest rates that occurred in March by 300 basis points at one time.
According to "Hermes," there were no developments that required any change in interest rates now, especially in light of the government and the central bank seeking international loans to bridge the expected financing gap caused by the Coronavirus.
"Hermes" expected inflation to stabilize at the level of 6 and 7%, which is the same as the previous forecast, because the decline in demand will limit the presence of any inflationary wave. Hermes estimated the financing gap at $10 billion, due to its expectation that the virus and its effects will continue until the end of the year, and that there will be a gradual recovery in 2021.
"Hermes" indicated that the revenues of the tourism sector may be non-existent and the remittances of workers abroad and the Suez Canal, and thus the gap will be between 10 to 12 billion dollars.
It also revealed that the new International Monetary Fund loan through the credit standby mechanism, will be in accordance with a new program for one year. The program is not expected to include new harsh measures, because the most difficult measures have been taken in the previous program. Adding that the program’s focus will be mainly on ensuring that economic indicators return to pre-crisis levels.
Egypt had obtained 2.77 billion dollars from the International Monetary Fund through the rapid financing mechanism, but the authorities applied for another loan according to the credit preparedness mechanism and its value could be up to twice the first loan.
Source (Al-Arabiya.net website, Edited)
