CAIRO: Egypt's central bank kept its key interest rates unchanged on Thursday, two days after Cairo said it was close to a three-year $12 billion IMF lending deal to ease its funding problems and restore market stability. Egypt said on Tuesday it was seeking to secure an IMF loan program which would extend $4 billion a year at an interest rate of 1 or 1.5 percent.
The country also plans to issue $2-3 billion in international bonds over a three year period.
The central bank said it kept its overnight deposit rate at 11.75 percent and its overnight lending rate at 12.75 percent, in line with the Reuters poll forecast.
Nine out of 13 respondents in a Reuters poll conducted before the IMF announcement expected the central bank to hold rates.
The central bank put up its key rates by 100 basis points to their highest level in years at its last MPC meeting on June 16, a move economists said was meant to rein in surging inflation and ease downward pressure on the Egyptian pound.
Inflation, however, jumped for the third straight month in June as consumer demand spiked during Ramadan. But core inflation, which excludes volatile items like fruits and vegetables, rose only slightly to 12.37 percent from 12.23 percent in May.
A deal with the IMF would mean painful economic reforms that could increase inflationary pressures, including a value added tax that is due to be implemented later this year, as well as further energy subsidy cuts.
The central bank devalued the pound to 8.78 per dollar in March and raised interest rates by 150 basis points days later to control inflation. But prices have continued to rise and the pound continues to face pressure on the black market.
President Abdel Fattah al-Sisi is under growing pressure to revive the economy and keep prices under control.
The country has struggled to restore economic growth since a 2011 uprising ended the 30-year rule of Hosni Mubarak.
The turmoil scared off tourists and foreign investors, both key sources of hard currency.
The economy grew about 4.2 percent in the last fiscal year and the government forecasts put growth this year around 5 percent while analysts polled by Reuters expect growth this year to be around 3.5 percent.
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