Pleasing Investors Is Getting Expensive for IMF-Backed Egypt
- Foreigners want higher rates as jitters sweep emerging markets
- Government finances, private businesses feel the pressure
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Egypt is facing a dilemma that’s troubling policymakers across emerging markets: what pleases overseas investors isn’t always what’s good for the economy.
It needs to maintain high interest rates to keep attracting foreigners, who hold about $17 billion in local debt, and avoid being sucked into a crisis that has swept emerging markets this year. But Egypt’s high borrowing costs are hurting businesses and setting back government plans to cut one of the highest budget deficits among developing economies.