Cairo - Mubasher: Pharos Research projects the annual inflation rate to reach 14.2% in fiscal year 2018-2019 after the Central Bank of Egypt's (CBE) Monetary Policy Committee (MPC) decision to raise interest rates by 200 basis points.

The research firm said in a report on Monday that this is in line with the MPC’s announced target range of 10-16% by the fourth quarter of next year.

“However, this remains above the International Monetary Fund (IMF) projection of 10.9% and 8.1% in FY18/19 and FY19/20, respectively,” the report noted.

According to Pharos, the recent 200 basis points rate hike will cost the government budget’s expenditure side around EGP 30 to 35 billion in additional interest payments per annum.

“Since there is only 40 days to go before the current fiscal year end, we believe that the negative impact on the budget deficit in FY16/17 will be limited. However, we expect the government to undertake further fiscal consolidation measures (mainly fuel products price hike) early on, in order to maintain the budget deficit within the pre-announced target in FY17/18,” the report added.

As per the report, the winners from the recent decision will be household savers, cash-rich companies and fixed income investors, while the losers will mainly be the highly leveraged companies, the debt providers, and equity investors.