Egypt’s central bank has continued to increase its lending to the government, despite a recent decline in inflation rates.
Economists warn that this practice could destabilize the economy by fueling inflation and weakening the Egyptian pound.
Central bank data reveals a significant surge in the “M1” money supply, a measure of circulating currency and demand deposits, over the past fiscal year.
This expansion is attributed, in part, to the government’s increased reliance on central bank financing.
Critics argue that such lending can lead to economic imbalances, including higher inflation and a weaker currency.
While headline inflation has decreased from a peak in September, experts caution that underlying economic weaknesses remain.
The central bank’s balance sheet shows a substantial increase in securities purchased from the government, including local currency bonds.
This lending contradicts a pledge made to the International Monetary Fund (IMF) as part of a $8 billion financial support agreement.