The IMF looks to be pushing Egypt to keep interest rates high in a bid to curb inflation. Egyptian policy makers need to put a special focus on inflation, said International Monetary Fund managing director Christine Lagarde at a press conference on Thursday kicking off the IMF and World Bank Spring Meetings, Reuters Arabic reports. The statement appears to be part of a push by IMF officials to see Egypt increase borrowing costs to curb its high inflation rate. Interest rates are “the right instrument” to manage Egypt’s inflation, said the director of the IMF’s Middle East and Central Asia department Jihad Azour at a press conference on Friday. “This is something that we are discussing with the authorities,” Bloomberg quoted Azour as adding.

The IMF’s push runs contrary to the opinions of a number of Egyptian officials andeconomists, who believe that slowdown of inflation in March suggests that the inflationary impact of the EGP float has started to taper off. “While headline inflation year-on-year is high, the pace of price increases month-on-month is moderating,” said Finance Minister Amr El Garhy on Thursday. “We do not believe that [an interest rate hike] would reduce inflation in Egypt” because the surge was caused by price shocks and “base effects” relating to the level of inflation a year ago, Arqaam Capital’s senior economist Reham El-Desoki tells Bloomberg. “The headline inflation rate will gradually decline as the effect of both tapers off,” she said.

The IMF’s insistence on high rates is also runs contrary to the limited effectiveness of interest rates as an instrument of policy transmission in a nation as un-banked as Egypt. Instead, high rates are driving up borrowing costs for the state and businesses alike while padding the margins of banks.

Separately, the IMF said it will also hold talks with the Ismail government overfuel-subsidy cuts. “We will need to discuss with the government the sequencing of measures to achieve their goal of eliminating subsidies on most fuel products during the program period,” Azour said.

An IMF delegation is expected to visit Egypt on 28 April to review policy implementation before deciding on dispersing the next tranche of the USD 12 bn IMF extended funds facility signed last November.

(For more on Lagarde’s comments on Egypt and the state of the global economy you can catch her presser from last Thursday here; runtime: 41:20).