Egypt’s central bank raises interest rates, cites Ukraine

The Central Bank of Egypt increased the key interest rate by 1%, to 9.75%. With the increases, overnight deposit and lending rate stood at 9.25% and 10.25% respectively, the bank said.

The increases followed an unscheduled meeting of the bank’s Monetary Policy Committee, which had been set to meet on Thursday.

Russia and Ukraine combine for nearly a third of the world’s wheat and barley exports. Ukraine is also is a major supplier of corn and the global leader in sunflower oil, used in food processing. The two countries are also a major source of visitors to Egypt, where tourism is a main source of foreign currency.

Credit rating agency Fitch said last week that the war in Ukraine would add to Egypt’s economic strains, including “reduced tourism inflows, higher food prices and greater financing challenges.”

Egypt is the world’s largest importer of wheat, mainly from Russia and Ukraine.

Meanwhile, Egypt’s annual inflation rate increased to 10% in February from 8% the previous month, according to the state-run statistics bureau.

Private bakeries have hiked the price of wheat-produced bread, a lifeline for most Egyptians, by up to 50%. A single loaf of bread costs 1.5 Egyptian pounds (9.5 cents), up from 1 pound (6.3 cents). State-run bakeries still sell 20 pieces of subsidized bread for 1 Egyptian pound.

The government, in an effort to prevent runaway prices of unsubsidized bread, announced Monday fixed prices for the next three months. Prime Minister Mustafa Madbouly set the price of a 45-gram flat bread for 0.5 pounds and a 65-gram loaf at 0.75 pounds.

The government said retailers that violate the pricing system could face a fine of up to 5 million pounds ($286,200).