by Marwa Yahya
CAIRO, March 18 (Xinhua) -- Egypt cut interest rates by the most ever in an emergency meeting to tackle the fallout of and limit the economic impact from the global coronavirus outbreak, said Waleed Gaballah, professor of financial and economic jurisdictions at Cairo University.
"It's a very bold decision to contain the severe impact of the coronavirus outbreak and the other global and regional challenges," Gaballah, also a member of the Egyptian Association for Political Economy said in an interview with Xinhua.
The interest rate cut by the Central Bank of Egypt (CBE) on Monday, the most since the flotation of the Egyptian pound in November 2016, was expected as a short-term measure to support economy, he said.
The Monetary Policy Committee reduced the overnight deposit rate by 300 basis points to 9.25 percent and the lending rate to 10.25 percent, the central bank said in a statement on Monday.
The Arab world's most populous nation has reported 196 cases of the virus, including six deaths, as of Tuesday.
Egypt has joined many countries in a parade of rate cuts, that happened even in large economies like the United States and some oil-producing countries like Kuwait, Saudi and the UAE, which is seen as a normal move in growing countries, the expert explained.
"The new cuts came at the right time amid the significant pressure on foreign investment portfolios due to sharp decline in the tourism revenues and the expats' remittances," he said.
However, the rate cuts wouldn't work probably in the long run, he added, expecting that the CBE will not introduce more cuts in 2020, because the recent cuts would bring the real interest rate after excluding inflation, which is below 9 percent now, to zero percent.
Still, he sees the U.S. Federal Reserve's move that cut the interests from 1.5 percent to zero interest only in two weeks "has shadowed on the global economy."
"Advocating that America comes first, Trump's administration sought to activate the industrial sectors and increase the American demand on the U.S. products by all means," Gaballah added.
He highlighted that with the U.S. current inflation of 0.1 percent, the rates cut wouldn't impact the American economic growth, noting that Trump administration has denied its international obligations and hit the world economic order to give more incentive to its investors.
"Cutting the rates will be one of other measures that Trump will announce very soon to boost its economy which all contradict with globalization and the trade exchange mechanisms that the world was heading to since the establishment of the World Trade Organization," the economic expert added.
Gaballah believed that the world economic system has been suffering structural flaws since the world financial crisis in 2008, adding the outbreak of coronavirus was a mere revealer rather than a cause for the world economic disorder.
The outbreak of coronavirus, despite its limited impact when compared with other diseases, has caused fear across the globe which mirrored the fragile economic globalization that hasn't been supported by a real backbone.
With travel bans, sporting event cancellation, mass gathering prohibition, stock markets fall, deserted shopping malls, no country would survive the economic recession unless big economies share their responsibilities, he stressed.
The oil-producing countrie, who suffered big losses as the demand decreased and the oil prices plunged to its lowest levels at 30 U.S. dollars, would not be able to continue its consuming luxuries model which will impact the demand on the world supplies, he pointed out.
Reaching a one percent global growth rate would be a dream now, he lamented, adding that countries with successful economic reforms could stand longer in the crisis until a vaccine is found for the virus.
Egypt economy is diversified and the economic reform program has given the North African country capability to bear and tackle the market fluctuations, Gaballah added.
Though the virus outbreak has harmed Egypt's tourism sector, the decline of the global oil prices has benefited the country that planned its budget with 67 dollars per barrel.
Egypt's rate cuts were adopted as part of a package of measures including lowering the natural gas and electricity prices for industry and providing exporters with one billion Egyptian pounds (nearly 63,440 U.S. dollars) to pay parts of their dues.