Yasser Emara, an economist and the head of Eagle Financial Consultancy, said that the decision by the Central Bank of Egypt (CBE) to fix the interest rate during its last meeting is right, as it works to boost foreign direct investment inflows. It also prevents fluctuations in the dollars price and protects the cash reserve, he added.
He added in an interview with Middle East Observer (MEO) that the establishment of a development investment fund for the first time in Egypt, in cooperation with the United Nations Development Program, will help in financing small and medium enterprises (SMEs) as a support for youth projects.
What is your comment regarding the CBEs decision to set the interest rate?
The Central Bank of Egypt (CBE) linked interests to inflation, Inflation rate is still high—and rising slowly. This is the main obstacle to the CBE, which is why they have not yet reduced interest rates. Treasury bills are
expected to rise relatively over the next few years.
Are there any advantages not to lower interest rates now?
Certainly, as it helps keep foreign direct investments in the domestic market. High interest rates help the CBE stabilize the dollar rate and support foreign exchange reserves.
Lowering the interest rate with high inflation also causes foreigners to refrain from bidding on T-bills. Thus, foreign investments decline, dollar yields fall, and the dollar rises again.
When do you expect interest rates will be lowered?
I expect that by the end of September interest rates may slightly lowered, as foreign reserves will rise comfortably and interest rates on T-bills may fall. Interest rates may also be lowered, thanks to an expected improvement in the economy and many other economic indicators.
Therefore, the current interest rate stabilization is a perfectly sound decision because the CBE has raised the interest rate in a series of rises of about 7% since the floating and the interest rate stabilization was necessary in November. This will be measured as an equal unit of
measurement, since the flotation of the pound took place in November 2016.
How do you see the establishment of the first development investment fund in cooperation with the United Nations to support entrepreneurship and small projects?
This fund will assist in the initial funding for SMEs. It is like assistance to youth and enterprises, and it affirms the interest of the Ministry of Investment and International Cooperation in youth and will certainly
represent the first installment of financing for SMEs.
I expect that the establishment of this fund will result in support for the financing of these projects to external support in the form of a number of machinery, as well as technical and technological support, and not only limited to local funding.
It should be noted that this type of fund is very fascinating, as it aims to invest in venture projects, as well as investment in projects that have a social dimension and provide opportunities for employment.
This fund requires easygoing executive procedures that differ from the current bureaucracy. How do you see the promotion of investment in Upper Egypt after the establishment of the "Supreme Commission to Develop Upper Egypt"?
The exclusive bodies that are issued by a republican decree have specific development goals. The establishment of this body means the states interest in Upper Egypt and the revival of forgotten investments in Upper Egypt. I expect the establishment of this body will attract investors, and that investments will move to Upper Egypt during the coming period. The linking of the Upper Egypt to the Golden Triangle, “Safaga-Qusair- Qena”; will boost investments, especially in the mining field.
How do you see the Ministry of Investment decision to establish a joint stock company to fund small companies?
The establishment of such a company is a brilliant idea. More importantly is the way the government will implement such an idea. It has announced recently the establishment of an investment fund for unexploited state assets, but this did not happen. A number of factors are needed to ensure the success of this company,
including overcoming any obstacles that it might face.
It will also be in line with the amendments of the Capital Market Law, as well as the issuance of the new Investment Law, which includes an investment map all over the country, including a large part for SMEs.