Economist, and American University in Cairo adjunct professor, Hany Genena explained to DNE the philosophy behind the IMF’sdemands, stating that the multiple interest rates — including the subsidised interest rate — disrupt the effectiveness of monetary policyHe also mentioned that the IMF is very interested in monetary policy with regard to interest rates and the exchange rate, so while having multiple interest rates, we have disrupted one of the mechanisms by which any central bank controls inflation and lending rates. However, the CBE removed this condition when lending with low interest for the industrial sector, meaning that money was being loaned out at no cost. Genena said that the IMF demanded at the time to have a unified interest rate, so this is not the first time to see this thinking or philosophy from the IMF. “The interest rates will increase during the next six months, so if the government cancelled the initiatives — and the exchange price of the USD rises — unfortunately, the industrial sector will be done for,” he warned. “After increasing, the interest rates will eventually gradually decline, and then by next year, all sectors will benefit from the low-interest rates.

Source: Daily News Egypt August 23, 2022 06:37 UTC