Egypt and Zambia cut benchmark interest rates as Botswana holds
Egypt and Zambia cut their benchmark interest rates by 100bps and 50bps respectively as Botswana decided to hold its prime rate....
Egypt and Zambia cut their benchmark interest rates by 100bps and 50bps respectively as Botswana decided to hold its prime rate.
Central Bank of Egypt cuts interest rates by 100 bps as inflation eases
The Central Bank of Egypt - CBE cut key interest rates by 100 basis points on Thursday 22 February, the bank said in a press release.
The overnight deposit rate was lowered to 17.75% from 18.75%, and the overnight lending rate was cut to 18.75% from 19.75%.
The rate of the central bank’s main operation and the discount rate were both cut by 100 basis points to 18.25%.
The CBE’s Monetary Policy Committee decided on the cut based on data that confirmed the “moderation of underlying inflationary pressures,” according to the statement.
The bank says the cut is still consistent with tight real monetary conditions in order to achieve the targeted inflation of 13 percent (± 3 percent) in Q4 2018 and single digits after that.
“Inflationary pressures have been contained, a consequence of tighter real monetary conditions,” the bank said.
“This has been evident by relatively tame monthly inflation figures, despite being affected by upward adjustments of regulated prices,” the bank added.
The annual headline inflation rate fell in January 2018 to 17.1% from 21.9% the previous month, and the core inflation rate to 14.4% from 19.86%, both declining for the sixth consecutive month.
The annual headline inflation rate had peaked in July 2017 at 33% and the core inflation rate at 35.3% in the same month on the back of the flotation of the Egyptian pound and cutting energy subsidies.
“Headline and core annual inflation rates thereby registered the lowest rates since October 2016 and September 2016, respectively,” the statement read.
“Favourable base effects have been accelerating the decline of annual inflation rates since November 2017,” the statement added.
The central bank had raised overnight rates by 700 basis points since it floated the EGP in November 2016 to curb high inflation rates.
Real GDP growth recorded 5.3% in December 2017, an upward trend for the fifth consecutive quarter, 5% in 2017, the highest since 2010.
“The pickup of economic growth was boosted by higher net external demand, due to more competitive exchange rates, followed by public domestic demand, which have more than offset lower private domestic demand,” the bank said.
“Output growth by economic activity was relatively diversified, and 83% of which was supplied by the private sector,” the bank added.”
Zambia's central bank cuts rate by another 50 bps on steady inflation Zambia's central bank continued to ease its monetary policy stance by cutting its policy rate and the reserve requirement to support economic growth and promote a stable financial system, and forecast inflation in the lower bound of its inflation target over the next eight quarters.
The Bank of Zambia (BOZ) cut its policy rate by another 50 basis points to 9.75% and has now cut it by 575 points since embarking on an easing cycle in February 2017.
The statutory reserve ratio was also cut by another 300 basis points to 5%, bringing the total reduction in the ratio to 13.5% points since February 2017.
"Changes in the Policy Rate will continue to be guided by inflation outcomes and forecasts as well as progress in fiscal consolidation," the BOZ said.
The rate cut comes at a time of uncertainty over whether Zambia - whose economy is starting to rebound after the rise in copper prices and good rains - will obtain a $1.3 billion extended credit facility from the International Monetary Fund (IMF).
In August 2017 discussions between the IMF and Zambia were put on hold after the IMF said the government's borrowing plans threatened debt sustainability, requesting "credible borrowing plans." But on Feb. 16 the IMF again rejected the government's borrowing plan.
"Against this background, future program discussions can only take place once the Zambian authorities implement credible measures that ensure debt contraction is consistent with a key program objective of stabilizing debt dynamics and putting them on a declining trend in the medium term," the IMF said last week.
Meanwhile, Zambia said on Saturday that it aimed to borrow directly from China's government and rearrange its loans from Chinese companies.
The rate cut comes at a time of uncertainty over whether Zambia - whose economy is starting to rebound after the rise in copper prices and good rains - will obtain a $1.3 billion extended credit facility from the International Monetary Fund (IMF).
In August 2017 discussions between the IMF and Zambia were put on hold after the IMF said the government's borrowing plans threatened debt sustainability, requesting "credible borrowing plans." But on Feb. 16 the IMF again rejected the government's borrowing plan.
"Against this background, future program discussions can only take place once the Zambian authorities implement credible measures that ensure debt contraction is consistent with a key program objective of stabilizing debt dynamics and putting them on a declining trend in the medium term," the IMF said last week.
Meanwhile, Zambia said on Saturday that it aimed to borrow directly from China's government and rearrange its loans from Chinese companies.
Zambia's total public debt at the end of August 2017 was US$12.45billion - including $7.5billion in external debt - and has said it wants to refinance $2.8billion of Eurobonds issued between 2012 and 2015 to cut the cost of debt service. Zambia's president also replaced the finance and mining ministers last week.
Despite uncertainty over Zambia's relations with the IMF, the exchange rate has remained firm and was trading at ZMW9.89/USD, up 1.9% this year.