The Central Bank of Egypt (CBE) reported that deposit and lending rates have begun to decline, reflecting the early effects of its monetary easing cycle launched in April 2025. The bank cut its key policy rates by a total of 3.25% in April and May.
According to the CBE’s latest Monetary Policy Report, the weighted average interest rate on new deposits fell to 18.8% in Q2 2025, down from 21% in Q1. Meanwhile, the average rate on new loans eased to 25.4% from 26.6%, marking the first clear transmission of policy rate cuts to the banking sector.
Yield curve normalisation
The CBE noted that Egypt’s yield curve began to revert to a more typical shape in Q4 of FY 2024/2025, coinciding with the start of the easing cycle. The spread between three-month and 12-month yields narrowed from 282 basis points to 192 basis points, while the spread between 12-month and three-year maturities fell sharply from 359 basis points to 155 basis points.
This pattern, the CBE explained, reflects the tendency for short-term yields to adjust faster than long-term yields in the early stages of monetary easing, offering markets a clearer signal on the likely direction of interest rates.
Stronger local debt market participation
Improved investor sentiment towards Egypt’s risk profile has encouraged greater participation in the local debt market, with stronger demand for long-term securities, including newly reissued fixed-rate bonds. Expectations of further rate cuts this year, alongside rising confidence in Egypt’s macroeconomic reform path, have bolstered this trend.
The Ministry of Finance has moved to capitalise on the lower interest rate environment by concentrating issuances on the longer end of the yield curve, aiming to extend the average maturity of domestic public debt and reduce refinancing risk. In Q4 of FY 2024/2025, the ministry reissued five-year fixed-rate bonds and maintained offerings of three-year and five-year floating-rate bonds.
Eurobond yields decline sharply
Egypt’s international bond yields also fell markedly, with Eurobond yields dropping by an average of 134 basis points in Q4 of FY 2024/2025, continuing a decline that began earlier in the year.
The CBE attributed this to both global and domestic factors. Globally, risk appetite for emerging-market assets strengthened, lifting demand for Egypt’s international bonds. Domestically, key drivers included the return of the banking sector’s net foreign assets to positive territory, the successful completion of the IMF’s fourth review, and steady portfolio inflows.
Private sector loan growth accelerates
The CBE reported that real growth in local currency loans to the private sector rose to 12.6% in Q2 2025, up from 10.1% in Q1. Both the private business sector and households contributed to the increase, supported by lower annual headline inflation.
Real growth in loans to the private business sector averaged 15% in Q2 2025, compared to 13% in Q1, driven by stronger contributions from the services and trade sectors—the latter turning positive for the first time since Q4 2022.
While the industrial sector’s contribution eased during the quarter, it remained positive, in line with preliminary indicators. According to the CBE, these trends are consistent with nowcasts pointing to continued recovery in real economic activity within the private sector in Q2 2025.
