Others are not so sanguine, saying high interest rates are prompting them to delay capex outlays. Some manufacturers have reportedly put planned investments on hold after the central bank hiked key interest rates by 200 bps last month, Al Borsa says. Alfa Ceramics is planning to cut investment in new production lines this year to EGP 20-30 mn, after initially budgeting in EGP 150 mn for five lines, company head Wageeh Besda said. Universal Group is also pushing back plans for electronic appliances production lines until next year due to the rate hike, while others such as El Welely Crops, decided to halt expansion plans indefinitely.

Why is this happening? It’s all about return on investment. Abraaj partner Ahmed Badreldin forecast this slowdown in our January 2017 CEO Poll, saying at the time, “High interest rates will definitely make investment decisions more difficult for some businesses. When you’re looking at deposit interest rates at 19-20% for 18 months offered by some banks, investing in capex and new capacity will demand higher returns compared to simply parking liquidity in a time deposit. His remarks — including his “counterintuitive” call for an interest rate cut — should be required reading for us all this morning.