He pointed out that such policies usually raise fears of inflation and overheating. Since the main aim of lowering the interest rate is to make other kinds of investments more attractive, the cash-strapped capital market is at the top of the list of beneficiaries. The listed companies' financial results are also expected to improve after the decrease in the cost of credit. Nomura International's Anais Faraj said they were not, according to Dow Jones news wires. Faraj said the Egyptian government needs to do much more before Egyptians can expect growth.
Monetary policy is too tight, fiscal policy is too loose and the exchange strategy is inappropriate.
The last discount rate reduction has not appeared to have led to a corresponding drop in the commercial bank credit rate and private inter-bank rates were minimally affected. Analysts believe this means confidence is lacking among banks and in the market as a whole towards the government's ability to maintain the exchange rate at its current level against the dollar. Banks and market players fear the CBE would not have the liquidity needed to cover their demand on credit. Egypt is trying to stabilise the exchange rate to the dollar after it abandoned a nine-year currency peg of around 3.4 pounds last May. Although the dollar's formal rate has been standing at the CBE's set rate of LE3.85 for three months now, its shortage in banks and money dealers bureaus has pushed its black market price to LE4.25.