Egypt estimates additional budget costs from rate hike at $2.7 billion — The Rio Times
In Egypt, a 1-percentage-point increase in key interest rates could raise annual state budget expenditures by about 150 billion Egyptian pounds, or $2.7 billion. This estimate was voiced by Mohamed El-Damati, deputy chairman of the Food Industries Chamber of the Federation of Egyptian Industries, The Rio Times reports.
According to El-Damati, the regulator's decision will increase the budget deficit, as the state pays interest on a significant volume of domestic debt. He stressed that 150 billion pounds is his own estimate of the additional burden from each percentage-point increase in rates. Egypt's Ministry of Finance has not published a comparable estimate of the costs resulting from the latest decision.
New central bank rates
On October 29, 2026, the Monetary Policy Committee of the Central Bank of Egypt raised its key rates by 1 percentage point. The overnight deposit rate increased from 19% to 20%, while the overnight lending rate rose from 20% to 21%. The main operational rate was raised from 19.5% to 20.5%.
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El-Damati said business representatives had expected rates to remain unchanged. In his view, inflation in the country is primarily caused by rising operating costs, the dollar, transportation and raw materials, rather than an excess of money in the economy.
Concerns over subsidies
The industry representative also suggested that an increase in the budget deficit could intensify pressure from the International Monetary Fund on Cairo to cut fuel subsidies. He believes that a rise in petroleum product prices would again accelerate inflation in that case. No changes to the fuel subsidy system have been announced so far.
He also drew attention to rising costs of imported raw materials for food production. According to his data, the price of a tonne of powdered milk rose from $2,600 to $4,000–4,200, while the cost of protein raw materials increased from $6,000–7,000 to $12,000–13,000. He named the weakening of the Egyptian pound from about 46 to 56 per dollar as an additional factor.
