Egypt

Global Economics – (2016-17)

Cover Page – Group Project (Section G)

Group Number        : G-12

Country                        :EGYPT

Group Members:

Monetary Policy in Egypt

Quantitive Theory at Work

[pic 1]

Interest Rates vs Inflation

[pic 2]

Source: World Bank

Recently Egypt has kept its interest rates steady. There is little motivation to increase rates due to the desirable under control inflation in Egypt. Cut rates would try to stimulate the economy to spend more money. Consequently, Egypt would receive an increase growth with the GDP, but also risks increasing the high inflation.

[pic 3]

Source: World Bank

The chart above shows the money and quasi money on a log scale for Egypt. The money growth has been worryingly fast in Egypt’s case which is causing higher inflation. This rise in inflation due to growth of money also adds to the budget deficit because the government has fixed the price of a wide array of goods and services it has undertaken to provide to the public. Every year, the government would have to raise the price of these goods – petrol, diesel, bread, etc – by 10 to 12 per cent just to keep its own costs neutral and by even more if it wants to decrease the deficit.