Abdel Latif explained that lower interest rates, combined with increased banking liquidity, allow financial institutions to expand their lending base and improve financing terms for small and micro enterprises, enhancing their ability to survive and grow.
He emphasized that the interest rate cut strengthens
companies' ability to attract back clients who left the market during previous
periods due to high interest rates. It also contributes to the gradual return
of demand for microfinance as borrowing conditions improve.
Abdel Latif pointed out that the decision helps reduce the
repayment burden on clients and improves the quality of loan portfolios. This
supports the sector's sustainability and reinforces its role in promoting broad
economic growth and increasing job opportunities, especially in labor-intensive
productive and service sectors.
He added that the Central Bank of Egypt's decision to cut
interest rates by 100 basis points, for the sixth time in ten months, reflects
a calculated development in monetary policy management, based on tangible
improvements in Egypt's macroeconomic indicators.
Abdel Latif noted that the decision comes amid slowing
inflation rates, improved performance of the Egyptian pound, increased foreign
inflows into local debt instruments, and an acceleration of economic growth to
its highest level in over three years.
He also stated that reducing the mandatory reserve ratio for
banks helps increase liquidity in the banking sector. This supports banks'
ability to expand lending and gradually eases the burden of servicing domestic
debt while maintaining a positive real interest rate that balances stimulating
economic activity with preserving monetary stability.
At the end of its meeting today, the Monetary Policy
Committee of the Central Bank of Egypt decided to cut interest rates by 1
percent, bringing the overnight deposit rate to 19 percent and the lending rate
to 20 percent.
The central bank uses interest rates to control inflation,
which means rising prices of goods and services, by lowering rates when
inflation slows or raising rates when price growth accelerates.