Board Members Governor and Chairman of the Board Dr. Farouk Abd El Baky El Okdah Deputy Governor Mr. Hisham Ramez Abdel Hafez Dr. Ziyad Ahmed Bahaa El Din Mr. Momtaz El-Said Dr. Ashraf Mohamed El-Sharqawy Mr. Hassan Abdalla Mr. Tarek Hassan Aly Amer Mr. Abd El Salam El AnwarMr. Mohamed Kamal El-Din Barakat Mr. Hazem Zaki Hassan Mrs. Mona Zulficar Dr. Mahmoud Abd El-Fadeel Hussein Mr. Aladdin Saba
A Central Bank of Egypt – Annual Report 2010/2011 Preface I have the honor to present the CBE Annual Report for FY 2010/2011. TheReport sheds light on the major domestic economic developments, especiallyeconomic growth, inflation, the state budget, the balance of payments, and foreigntrade, besides reviewing the CBEs activities and the main monetary, credit andbanking developments. On the domestic arena, the central event that marked FY 2010/2011 was theoutbreak of the 25 January Revolution and the Arab spring revolutions, which aspiredto change the political landscape and better the economic, social and politicalconditions of the region, after the transition periods elapse and their aftereffects aresubdued. As far as Egypt is concerned, the major challenge is security instabilitywhich cast its dark shadows on tourism, travel, and investment, and drove downemployment and production rates in a large number of factories. Unfortunately, suchrepercussions coincided with the fallout of the turmoil in the neighboring Arabcountries, the credit crisis of the euro area, and the adverse world economicdevelopments. In this setting, real GDP growth (at factor cost) slowed to 1.9 percentfrom 5.1 percent and, to 1.8 percent (at constant prices) from 5.1 percent. Obviously,the decline intensified in Q3 (Jan./March 2011), where GDP at factor cost recorded anegative 3.8 percent (against a positive 5.6 percent), and a negative 4.2 percent atconstant prices (against a positive 5.4 percent) due to the spillovers of the Revolutionin this transitional period. The decisions of the Monetary Policy Committee (MPC) during FY2010/2011 continued to be supportive of economic growth, and in line with theoverriding objective of the monetary policy (price stability). The MPC’s decisionswere tuned to this objective, keeping the overnight lending and deposit rates broadlyunchanged at 8.25 percent and 9.75 percent, respectively, and the discount rate at 8.5percent in its eight meetings held during the reporting year. These rates remained ineffect at the time of preparing the report and just before the meeting held on 24November 2011, where the MPC raised the lending rate by 100 basis points to 9.25percent, the overnight lending rate by 50 basis points to 10.25 percent, and thediscount rate by 100 points to 9.50 percent. In March 2011, the MPC launchedregular repurchasing agreements (repos), to pump the necessary funds to banks thatare likely to face liquidity pressures. These operations bore an interest rate of 9.25percent, which remained applicable until 24 November 2011, where it was increasedby 50 basis points to 9.75 percent. Prompted by a resolute commitment to the banking reform program, theCBE launched the second phase, after the success of the first phase that provedeffective in cushioning banks against the risks posed by spillovers from the globalfinancial crisis. In the reporting year; specifically at the time of the Revolution and inits aftermath, the CBE responded with a number of decisions to regulate the banking
BCentral Bank of Egypt – Annual Report 2010/2011activity and strengthen supervision over transfers abroad. Moreover, banks wererequired to open accounts for donations from the countrys stakeholders for socialresponsibility projects (the Report will tackle this in further detail). In the context of applying governance rules as one of the targets of the secondphase of the reform program, the CBE Board of Directors issued on August 23 2011,its decree dated 5 July 2011, regarding banks governance rules. Accordingly, banksregistered at the CBE are required to comply to the regulation by maximum 1 March2012 as due date each according to the scope and complexity of its business, policies,and respective risk management capacity. At the time of preparing the Report at hand, Decree Law no. 125 was issued on8 Oct., 2011, amending certain provisions of Law No. 88 of 2003 of the CentralBank, Banking Sector and Money, to enforce governance rules and prevent anyconflict of interests pertaining to the CBEs Board of Directors. Accordingly, a newboard was formed to replace the former that served its term by end of November2011. The new board comprised 9 members, instead of 15 (the CBE Governor andhis two deputy governors, a representative of the Ministry of Finance, the Chairmanof the Egyptian Financial Supervisory Authority; and four members with expertise infinancial, economic, and legal matters). The aggregate financial position of banks (39 in number) reached LE 1.3trillion as at the end of June 2011, with total equity of LE 81.1 billion, deposits of LE957.0 billion, and investments in securities and bills of LE 474.2 billion. As forfinancial soundness indicators, the capital adequacy ratio (capital/risk-weightedassets) reached approximately 16.0 percent as at the end of June 2011, against aminimum requirement of 10 percent. Profitability indicators showed animprovement in 2010, as return on assets reached 1 percent, on equity 14.3 percent,and net interest margin 2.3 percent (against 0.8 percent, 13 percent, and 2.2 percent,respectively, in FY 2009). Out of its belief that the ability of the foreign exchange market to satisfy thefinancing needs of clients is a prerequisite for fostering confidence in that market, allthe more so during the Revolution and at its aftermath, the CBE has kept up itseffective and balanced management of the forex market, through the dollar interbanksystem, to safeguard the market against any drastic volatility, especially after thenoticeable decline in foreign investments (direct and indirect) and the dramatic fall intourism revenues amidst the political unrest in Egypt. The weighted average of theUS dollar in the interbank market posted LE 5.9690 as at the end of June 2011,against LE 5.8496 as at the end of January, signifying the depreciation of the LEvalue by 2.0 percent; albeit lesser than expected by international institutions. Later,the US dollar exchange rate posted LE 6.0319 as at the end of December (the periodis not covered by the report).
C Central Bank of Egypt – Annual Report 2010/2011 Net international reserves (NIR) at the CBE were adversely influenced bythe events that the country witnessed in the second half of the reporting year. NIRreceded by US$ 8.6 billion or 24.6 percent in the year of the report, ending the year atUS$ 26.6 billion (against US$ 36.0 billion at end of Dec. 2010 and US$ 35.2 billionat end of June). The decrease in NIR was heavily felt in the second half of the FY,which bore witness to the repercussions of the recent events that came over thecountry. Tourism receipts plummeted by 47.5 percent in the second half of the FY ascompared with the first half, and for the first time, the FDI recorded a negative figureof US$ 65 million, and portfolio investments revealed a net outflow of US$ 7.1billion. The drain on NIR continued at the time of preparing the report, pushing themdown further to US$ 18.1 billion at end of December 2011. Transactions with the external world unfolded an overall BOP deficit of US$9.8 billion (against an overall surplus of US$ 3.4 billion a year earlier). In the secondhalf of the FY (January/June 2011), the BOP ran an overall deficit of US$ 10.3billion (against an overall surplus of US$ 571.7 million in the first half), on the backof the Arab spring events in Egypt and the Arab region. The overall deficit in thereporting year reflected the current account deficit that narrowed by 35.9 percent toUS$ 2.8 billion (against US$ 4.3 billion in the year of comparison), along with thenet outflows of US$ 4.8 billion of the capital and financial account (against netinflows of US$ 8.3 billion). While the report is being prepared, the BOP registered anoverall deficit of US$ 2.4 billion in July/Sept. 2011/2012 (contrasted to an overallsurplus of US$ 14.7 million in July/Sept. 2010/2011). Finally, I seize this opportunity to thank and pay tribute to the former membersof the CBE Board of Directors for their sincere efforts, noting that their term of officecame to an end by the time the amendments to Law No. 88 of 2003 were issued.Also, I would like to extend my thanks to all the staff of the CBE and the bankingsystem for their efforts that enabled the banking system to continue performing itsrole under the umbrella of development and modernization. May God help us serveour dear country and further its progress and prosperity. The CBE Governor Dr. Farouk El Okdah
Contents of the Annual Report Main Indicators of the Performance of Egyptian Economic Sectors A-B Executive Summary C-IChapter 1 Central Bank of Egypt1/1 Monetary Policy 11/2 Reserve Money 31/3 Payment Systems and Information Technology (IT) 61/4 Domestic Liquidity and Counterpart Assets 101/5 Supervision Sector 141/6 Banking Sector Reform 201/7 Management of the Foreign Exchange Market and International Reserves 231/8 Domestic and External Public Debt 241/9 Human Resources Development (HRD) 36Chapter 2 Banking Developments2/1 Financial Position 412/2 Deposits 442/3 Lending Activity 452/4 Cash Flows at Banks 472/5 Bank Performance Indicators 49Chapter 3 Macroeconomic Developments3/1 Gross Domestic Product (GDP) 533/2 Inflation 593/3 Consolidated Fiscal Operations of the General Government 643/4 Balance of Payments and External Trade 683/5 Non-Banking Financial Services Sector 89 Annex Statistical Section 95
A Central Bank of Egypt – Annual Report 2010/2011 Main Indicators of the Performance of Egyptian Economic Sectors Fiscal Year 2009/10 2010/11Real SectorReal GDP growth rate at factor cost (%), 5.1 1.9of which : The share of the private sector (percentage) 4.0 0.8Real GDP growth rate at market and constant prices (%), 5.1 1.8of which: Share of private consumption (percentage) 2.9 3.2 Share of public consumption (percentage) 0.5 0.4 Share of investment (percentage) 1.6 -0.8 Share of net external demand (exports of goods and services - imports of goods and services) (percentage) 0.1 -1.0CPI inflation (urban) July/June (%) 10.1 11.8PPI inflation, July/June (%) 8.6 19.4Financial & Monetary SectorDomestic liquidity growth rate M2 (%) 10.4 10.0Growth rate of time & saving deposits in local currency (%) 13.4 7.0Growth rate of foreign currency deposits (%) (5.4) 11.9Foreign currency deposits/ Total deposits (dollarization rate)(%) 20.2 21.0Private business sector credit/ Total credit (%) 42.1 36.2Net claims on the government /Total credit (%) 42.0 49.0Household sector credit/ Total credit (%) 12.0 11.1Public business sector credit/ Total credit (%) 3.9 3.7Change in private business sector credit/Change in totalcredit (%) 27.4 (2.7)Change in net claims on the government/Change in totalcredit (%) 66.3 94.6
BCentral Bank of Egypt – Annual Report 2010/2011 Main Indicators of the Performance of Egyptian Economic Sectors (contd.) Fiscal Year 2009/10 2010/11Change in household sector credit/ Change in total credit(%) 10.3 5.5Change in public business sector credit/ Change in totalcredit (%) (4.0) 2.6Net international reserves (US$ mn) at end of the period 35221 26564NIR in months of merchandise imports 8.6 6.3Banks’ Financial Soundness Indicators (FSIs), of which: Capital adequacy ratio (%) 16.3 16.0 Nonperforming loans/Total gross loans (%) 13.6 11.0 Loan provisions/ Total nonperforming loans (%) 92.5 93.6 Return on average assets* (%) 0.8 1.0 Return on average equities* (%) 13.0 14.3External SectorTrade Balance/GDP (%) (11.5) (10.1)Service Balance/ GDP (%) 4.7 3.3FDI in Egypt (net)/GDP (%) 3.1 0.9Net transfers/ GDP (%) 4.8 5.6External DebtExternal debt/ GDP (%) 15.9 15.2Short-term external debt/Total external debt 8.8 7.9External debt service/Exports of goods and services (%) 5.5 5.7Budget SectorExpenditure/GDP (%) 30.3 28.5Revenues/GDP (%) 22.2 18.8Total wages/Total public revenues (%) 31.8 36.6Primary deficit**/GDP (%) 2.1 3.7Overall deficit/GDP (%) 8.1 9.5Gross domestic public debt/GDP (%) 73.6 76.2* According to the latest audited financial statements for FY 2009 and 2010. The fiscal year ends on June 30 for public sector banks and on December 31 for other banks.** Overall deficit, excluding the interest payments.
C Central Bank of Egypt – Annual Report 2010/2011 Executive Summary The Annual Report for FY 2010/2011 highlights major international economicdevelopments and the CBE’s activity, along with the main monetary, credit andbanking developments. Also, the Report sheds light on the key domestic economicdevelopments, including economic growth, inflation, the state budget, balance ofpayments and external trade. In FY 2010/11, real GDP growth at factor cost slowed to 1.9 percent (from5.1 percent a year earlier) and to 1.8 percent (from 5.1 percent) at market andconstant prices. The sectors that primarily underperformed were the manufacturing,construction and building, finance, and communications and information. Theslowdown was intense in the third quarter (Jan./March 2011) in which real GDPgrowth at factor cost slackened to a negative 3.8 percent (down from a positive 5.6percent) and to a negative 4.2 percent (from a positive 5.4 percent) at market andconstant prices. This is traced to the events of the January 25th Revolution, and theresultant disruption and instability of most economic sectors. However, GDP growthincreased in the last quarter of the year, recording a positive 0.3 percent at factor costand 0.4 percent at constant and market prices. The recovery was led by the betterperformance of some sectors, especially agriculture and irrigation; transportation andstorage; wholesale and retail trade; and real estate activities. Implemented investments at current prices fell by 1.2 percent (against a riseof 17.6 percent in the year of comparison), to reach LE 229.0 billion. The decline wasmainly in the second half of the year, particularly in Q3 (Jan./March). Interestingly,the private sector’s investments escalated by 15.7 percent (against 11.6 percent), toregister LE 146.6 billion or 64.0 percent of total investments in the reporting year.The rise in the private sectors investments was specifically in the first half of the year(14.8 percent), contrasted with 0.9 percent in the second half. Reacting to the political changes in Egypt in the second half of FY 2010/2011,which cast their shadow over the level of economic activity and the performance offinancial markets, and eventually over the available liquidity in the market, the MPC(in its meeting dated 10 March, 2011) decided to launch weekly repo operations on aregular basis under the operational framework of the CBE monetary policy, with amaturity of one week and an interest rate to be set by the MPC in each meeting. Theaim is to provide adequate liquidity for banks that may face potential pressures ontheir liquidity position. The Committee set an interest rate of 9.25 percent per annumon repos, and the rate remained in effect till the end of June 2011. At the time ofpreparing this Report, the Committee decided in its meetings on 21 July, 25 August,and 13 October 2011, to keep the rate unchanged. Later, on 24 November, the MPCincreased the 7-day repos by 50 bps to 9.75 percent.
DCentral Bank of Egypt – Annual Report 2010/2011 Reserve money reached LE 251.0 billion at end of June 2011, up by LE 47.9billion or 23.6 percent during FY 2010/11, well above the LE 28.0 billion and 16percent of the preceding FY. Noticeably, 68 percent of the increase took place in thesecond half of the year (Jan./June 2011). The bulk of the increase (roughly 80percent) was in the currency in circulation outside the CBE, to meet the withdrawalsfrom deposit and client accounts during, and in the aftermath of, the Egyptianrevolution. Domestic liquidity went up by LE 91.9 billion or 10.0 percent (as compared toLE 86.2 billion and 10.4 percent in the preceding FY) ending the year at LE 1009.4billion. The rise in domestic liquidity was reflected in the growth of money supplyand quasi money. Money supply scaled up by LE 34.7 billion or 16.2 percent andquasi money by LE 57.2 billion or 8.1 percent. The pickup in quasi money was anoutcome of the rise in LE time and saving deposits by LE 38.4 billion or 7.0 percentand in foreign currency deposits by LE 18.8 billion worth or 11.9 percent. Giventhese developments, the dollarization ratio (foreign currency deposits/total deposits)inched up to 21.0 percent at end of June 2011 (from 20.2 percent at end of June 2010and from 19.0 percent at end of Dec.). While this indicates a partial shift to foreigncurrency savings, especially in the second half of the reporting year, time and savingdeposits in LE continued to represent the bulk of banking deposits (69.4 percent) atend of June 2011. Out of its commitment to the banking reform program, launched inSeptember 2004, the CBE is currently executing the second phase of the program(2009-2011). The main pillars of this phase are: preparing and implementing acomprehensive program for the financial and managerial restructuring of specializedstate-owned banks; following up - on a periodic basis - the results of the first phase ofthe restructuring program of the National Bank of Egypt (NBE), Banque Misr (BM)and Banque du Caire (BdC), which revealed that the first phase of the reformprogram had already borne fruit and positively affected their performance levels; andfulfilling all requirements for upgrading the efficiency of these banks in financialintermediation and risk management. The second phase aims also at applying Basel IIstandards in Egyptian banks to enhance their risk management practices. The CBEsstrategy for the implementation of Basel II framework is based on two mainprinciples, namely simplicity and communication with banks, to ensure banks’compliance with these standards. The strategy will be phased in over four stages. Thesecond phase of the reform program also aims at adopting an initiative promoting thedevelopment and growth of banking services and access to finance especially forsmall- and medium-sized enterprises (SMEs), as well as reviewing and strictlyapplying the international governance rules of banks.
E Central Bank of Egypt – Annual Report 2010/2011 In this respect, the CBE exempted banks deposits - equivalent to the amount ofloans extended thereby to finance SMEs - from the reserve requirement ratio (14percent). On the other hand, the CBE approved bank governance rules, which aim athelping banks set/develop their governance systems. As such, each bank shall applythese rules in accordance with the volume and complexity of its activities, andstrategy, as well as capacity for risk management. Banks were also given a graceperiod till the 1st of March 2012 to put these rules into effect. The second phase of the banking reform program has proceeded, after the firstphase was successfully implemented, where some voluntary and state-forced mergerstook place, decreasing the number of banks operating in Egypt from 57 at end ofDecember 2004 to 39 banks at end of Dec. 2008, and till the end of the reportingyear. Also, during the first phase of the program, state-owned banks wererestructured, and the problem of non-performing loans was addressed, as more than90 percent of NPLs (excluding debts of the public business sector) were settled.Furthermore, debts of the public business sector were fully settled and the CBE’sSupervision Sector was upgraded. Due to the exceptional circumstances that Egypt has gone through since thebeginning of the year, a number of decisions and measures were taken by the CBE toregulate banking business and minimize potential risks. Salient of these decisionswere setting limits on transfers abroad and cash withdrawals by individuals. Bankswere also requested to submit weekly statements on loan balances, client deposits, thelocal and foreign currency liquidity ratios; and daily statements on cash withdrawalsand deposits, and inward and outward external transfers. In the last quarter of the FY,banks were provided with detailed regulations and procedures for applying the Boardof Directors’ decision regarding regulations for the limits of the concentrations inlocal banks investments with countries and financial groups and institutions abroad.Furthermore, a plan was set to review the outstanding credit facilities of all customersand their guarantees, given that the position of each customer shall be studied on acase-by-case basis, taking into consideration the effect of the current crisis oncustomers’ solvency and the quality of credit extended. As for the tourism sector in particular, a six-month grace period (from Jan. toJune 2011) was extended for the installment payments due on customers thereof, tosubdue the negative effects on this sector. In addition, delay interest on deferredinstallments will not be imposed, and this will not deem the facilities non-performing.Moreover, out of social responsibility, the CBE required banks to open accounts attheir branches to raise donations for scientific projects and the eradication of squatterareas.
FCentral Bank of Egypt – Annual Report 2010/2011 The financial position of banks operating in Egypt (excluding the CBE)amounted to LE 1269.7 billion at end of June 2011, up by LE 49.0 billion or 4.0percent. Deposits at banks grew by LE 64.5 billion or 7.2 percent (against LE 82.8billion or 10.2 percent during the preceding FY), reaching LE 957.0 billion andconstituting 75.4 percent of the aggregate financial position of banks at end of June2011. Lending and discount balances went up by LE 8.1 billion or 1.7 percent(against LE 36.0 billion and 8.4 percent), ending the year at LE 474.1 billion. Banksinvestments in securities and bills escalated by LE 68.3 billion or 16.8 percent(against LE 73.3 billion and 22.0 percent in the previous FY), to stand at LE 474.2billion at end of June 2011. The CBE issued the financial soundness indicators (FSIs) of the bankingsystem (i.e., capital adequacy, profitability, liquidity and asset quality). A follow-upof banks’ compliance came up with the following: - Capital adequacy: The capital/risk weighted assets slightly retreated to 16 percent at end of June 2011, from 16.3 percent at end of June 2010 (against a minimum established ratio of 10 percent). Equities/assets declined as well, to 6.4 percent, from 6.7 percent. However, Tier 1 capital to risk-weighted assets improved, registering 13.3 percent against 12.7 percent. - Profitability: Relative to FY 2009, profitability indicators in 2010 improved: the return on assets reached 1 percent, the return on equities 14.3 percent and net interest margin 2.3 percent (against 0.8 percent, 13 percent and 2.2 percent, respectively). - Asset quality: Non-performing loans/ total gross loans decreased to 11 percent at end of June 2011, from 13.6 percent at end of FY 2010, as state- owned banks wrote off a number of non-performing loans. Concurrently, provisions/total non-performing loans increased from 92.5 percent to 93.6 percent. - Liquidity: Liquidity indicators improved, as liquidity ratios in local and foreign currencies posted 55.3 percent and 51.1 percent, respectively, at end of June 2011, against 44.7 percent and 40.6 percent, at end of FY 2010. This reflected liquidity levels available at banks and their ability/willingness to cater for clients needs in order to stimulate the economy. Moving to the payment systems and information technology (IT), the CBEkept upgrading these systems to bolster the soundness and stability of the financialsystem, reduce credit risks, expedite payment settlements, and ensure their reliabilityand confidentiality. Such efforts virtually supported the financial stability in Egypt,especially during the revolution. The Report tackles – in some detail – the mainmeasures that have been taken in this area.
G Central Bank of Egypt – Annual Report 2010/2011 Attesting to the CBEs successful management of the foreign exchangemarket through the dollar interbank system, the market - which proved resilient tothe repercussions of the global financial crisis- has gone another tough test, and againit proved its robustness. The market managed to prudently and efficiently address thecrisis it had encountered in the wake of the events of the revolution, which wasassociated with a noticeable reduction in the volume of foreign investments in thesecond half of the reporting year. Such a prudent management proved effective inprotecting the Egyptian pound from sharp fluctuations. The weighted average of theUS dollar in the interbank market posted LE 5.9690 at end of June 2011 (against LE5.8496 at end of January) with a decline of only 2.0 percent, lower than predicted byinternational institutions. Later, the rate registered LE 6.0319 per dollar at end ofDec. 2011. This ascertains investors and dealers confidence in the efficiency of theforeign exchange system, a fact that is conducive to a stable and orderly tradingmarket, free from turmoil or fears. The profound confidence in the forex market alsohelps cushion the negative effects of the crisis on the Egyptian economy andstrengthen the ability of the economy to recover. Overall, reviewing FY 2010/2011 asa whole tells us that the rate of decline in the value of the Egyptian pound was all inall 4.6 percent. Amid the extraordinary events witnessed in the second half of the year, netinternational reserves at the CBE shrank by about US$ 8.6 billion or 24.6 percent,to end the year at US$ 26.6 billion, against US$ 36.0 billion at end of Dec. 2010 andUS$ 35.2 billion at end of June 2010 (the decline in Jan./June 2011 was by aboutUS$ 9.4 billion or 26.2 percent). Withdrawals from NIRs were mainly to make up forthe departure of many foreign investors from the market in the second half of theyear. Notwithstanding their contraction, NIRs covered 6.3 months of merchandiseimports at end of June 2011. At the time of preparing this Report, NIRs continued todecline further, standing at US$ 18.1 billion at end of December, thereby covering3.7 months. In FY 2010/2011, Q3 (Jan./March), the Egyptian Exchange was closed from28 January to 22 March 2011 (38 consecutive trading sessions) amid theunprecedented events attending the January 25th Revolution and the months thatfollowed. Trading over the counter was also suspended till 28 March, following thesharp decline in the benchmark index (EGX 30) by 16 percent on 26 and 27 January,closing at 5646.5 points against 6723.2 points before the outbreak of the events. Onthe first day of resuming trading (23 March), the index plunged by 23.5 percent (ascompared with its pre-revolution level), recording the third sharpest daily fall sinceits launch on 2 Feb. 2003. The fall due to large sales of investors amidst growingconcerns of larger losses. On its part, the EGX undertook a number of exceptionalmeasures to bolster investors confidence (Egyptians and foreigners alike) in themarket.
HCentral Bank of Egypt – Annual Report 2010/2011 Overall, the benchmark index (EGX 30) fell by 10.9 percent in FY 2010/2011,to record 5373.0 points at end of June 2011 (against 6033.1 points at end of June2010), owing to the political unrest associated with the January 25th revolution.However, EGX 70 (index of small - and medium-sized enterprises) moved up by 19.3percent to register 629.6 points, and so did EGX 100 by 7.1 percent to 972.9 points atend of June 2011. As regards public finance, the FY 2010/11 witnessed an increase of 7.1percent in total expenditures, and a decrease of 3.2 percent in total revenues, affectedby the events and repercussions of the revolution. The overall deficit reached someLE 130.4 billion, up by 33.0 percent compared with the previous FY, thus exceedingthe estimated figure for the year by 19.5 percent. To address the consequences of the current events, the government took anumber of measures. The most important of which were (i) establishing an additionalbudget appropriation of LE 10.0 billion to meet the basic requirements of subsidizingfood commodities in the subject year, (ii) establishing a compensation fund forindividuals and small and micro enterprises affected by these events, (iii) appointing,on a permanent basis, some of the temporary-contract employees, (iv) raising thenumber of beneficiary families of the social solidarity pension, (v) disbursingexceptional pensions and compensations to the families of the revolutions martyrs,and (vi) exempting those with overdue insurance premiums from paying delay fines. According to the preliminary actual data of the consolidated fiscal operationsof the general government (administrative system - local administration - serviceauthorities) in FY 2010/11, total revenues reached LE 259.6 billion and totalexpenditures LE 392.1 billion. Against this background, the cash deficit amounted toLE 132.5 billion or 9.6 percent of GDP during the year. By adding the net acquisitionof financial assets (LE -2.1 billion) to that cash deficit, the overall deficit would postLE 130.4 billion or 9.5 percent of GDP. Local financing sources, mainly banks’subscriptions for treasury bills (LE 74.0 billion), were chiefly used to finance theoverall deficit, while an amount of only LE 5.0 billion was provided from externalsources. Domestic public debt reached LE 1044.9 billion at end of June 2011(76.2percent of GDP). It consists of the sum of net government debt, public economicauthorities debt and that of the National Investment Bank (minus intra-debts ofpublic economic authorities and the government to NIB). Moving to external transactions, the balance of payments ran an overalldeficit of US$ 9.8 billion, constituting 4.1 percent of GDP (against an overall surplusof US$ 3.4 billion and 1.5 percent of GDP a year earlier).
I Central Bank of Egypt – Annual Report 2010/2011 The current account deficit narrowed by 35.9 percent, to US$ 2.8 billion or 1.2percent of GDP (against US$ 4.3 billion a year earlier). The decline came on the backof a 5.3 percent retreat in the trade deficit to stand at US$ 23.8 billion, and a 25.6percent increase in net unrequited transfers, on the one hand, and a 23.8 percentdecrease in services surplus, on the other hand. Capital and financial transactionswith the external world unfolded a net outflow of US$ 4.8 billion (against a netinflow of US$ 8.3 billion), as data shows a reversal in portfolio investments from anet inflow of US$ 7.9 billion, to a net outflow of US$ 2.6 billion. FDI (net basis) inEgypt rolled back by 67.6 percent, registering US$ 2.2 billion (against US$ 6.8billion). The external debt increased by about US$ 1.2 billion. Its outstanding balance(public and private) denominated in US dollar posted US$ 34.9 billion at end of June2011, as compared with the end of June 2010. The increase was ascribed to theappreciation of most currencies of borrowing versus the US dollar by an amountequivalent to US$ 2.4 billion; the retreat in the balances of Egyptian governmentbonds and notes issued in international markets (as part of those bonds and notes hasbeen purchased by resident entities at a value of US$ 242.0 million); and to netrepayments of loans and facilities in the amount of US$ 1.0 billion.
Chapter 1: Central Bank of Egypt 1/1- Monetary Policy 1/2- Reserve Money 1/3- Payment Systems and Information Technology (IT) 1/4- Domestic Liquidity and Counterpart Assets 1/5- Banking Supervision 1/6- Banking Sector Reform 1/7- Management of the Foreign Exchange Market and International Reserves 1/8- Domestic and External Public Debt 1/9- Human Resources Development
1 Central Bank of Egypt – Annual Report 2010/2011 Chapter 1 Central Bank of Egypt1/1- Monetary Policy Embracing price stability as the ultimate objective of the monetary policy, theCBE seeks to bring inflation to an appropriate and stable level that helps buildconfidence and sustain appropriate levels of investment and achieve the targetedeconomic growth. The CBE adopted the overnight interbank interest rate as the operational targetof the monetary policy, by applying a framework based on the corridor system,within which the ceiling is the overnight interest rate on lending from the bank, andthe floor is the overnight deposit interest rate at the bank. The decisions taken by the MPC in the eight periodic meetings held in FY2010/2011 were responsive to the changes in inflation and the Committeesassessment of inflationary pressures. In these meetings, the MPC decided to keep theCBE key interest rates (the overnight deposit and lending rates) and the discount rateunchanged at 8.25 percent, 9.75 percent and 8.50 percent per annum, in order. Theserates were kept applicable at the time of preparing this Report and till the meeting ofthe Committee on November 24, 2011. In that meeting, the overnight deposit ratewas raised by 100 bps to 9.25 percent and the overnight lending rate by 50 bps to10.25 percent. The discount rate was also raised by 100 bps to 9.5 percent. In light of the political events in Egypt in the second half of the FY, whichinfluenced the pace of economic activity and the performance of financial markets,and affected in turn the available liquidity in the market, the MPC (in its meeting on10 March, 2011) decided to launch weekly repo operations on a regular basis underthe operational framework of the CBE monetary policy, to provide adequate liquidityfor banking system units that may face potential liquidity pressures. The MPCassigned a maturity of one week for these operations and an interest rate to be set bythe Committee in each meeting. The interest rate on these operations was determinedat 9.25 percent per annum, and this rate was kept applicable till the meeting of theCommittee on November 24, 2011. In this meeting, the MPC decided to raise the 7-day repo by 50 bps to 9.75 percent. The following are the CBE’s key interest rates according to the MPC’sdecisions in its eight meetings held during FY 2010/2011:
2Central Bank of Egypt – Annual Report 2010/2011 Overnight Deposit Overnight Lending Lending & Interest Rate Interest Rate Discount Rate 17 June 2010 8.25% 9.75% 8.50% 29 July 2010 Unchanged Unchanged Unchanged 16 September 2010 " " " 4 November 2010 " " " 16 December 2010 " " " 27 January 2011 " " " 10 March 2011 " " " 28 April 2011 " " " 9 June 2011 " " " Given the excess liquidity at the banking system in the period starting July 1,2010 till the end of January 2011, the weighted average of the overnight interbankrate was close to the CBE overnight deposit rate. However, in light of the politicalevents that Egypt went through and their economic impacts on the money market, thebalance of excess liquidity at the banking system decreased. Accordingly, theweighted average of the overnight interbank interest rate rose in the second half ofFY 2010/2011, hovering around the middle of the corridor. (see the following chart) (٪) O/N Interbank Rate and Policy Rates 14.00 13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00 9.50 9.00 8.50 8.00 7.50 7 08 8 09 9 10 0 08 08 09 09 10 10 11 11 00 00 00 01 20 20 20 20 20 20 20 20 20 20 20 r2 r2 r2 r2 r r r ne ne ne ne ch ch ch ch be be be be be be be Ju Ju Ju Ju ar ar ar ar em em em em em em em M M M M 30 30 30 30 ec ec ec ec pt pt pt 31 31 31 31 Se Se Se D D D D 31 31 31 31 30 30 30 Overnight interbank Deposit facility rate Lending facility rate The MPCs decisions led to a relative stability of the market interest rates+ ondeposits and loans, as the average interest rate on deposits with maturities of threemonths posted some 6.6 percent per annum at end of June 2011 (against 6.3 percentper annum, at end of June 2010). Concurrently, the average interest rate on loans ofone year declined to 11.0 percent per annum, from 11.1 percent per annum.+ Data on interest rates (deposits and loans) were compiled, using the Domestic Money Monitoring System (DMMS)launched in June 2010.
3 Central Bank of Egypt – Annual Report 2010/2011Open Market Operations: The reporting year witnessed a decline in the outstanding balance of liquidity,which the CBE had absorbed through its deposit acceptance operations. This waslargely attributed to the higher foreign currency sales by the CBE to banks. Withinthe framework of open market operations, the balance of deposits accepted by theCBE registered some LE 101.5 billion at end of June 2010, decreasing to some LE83.1 billion at end of January 2011 and continued to gradually decline through therest of the FY. As an outcome of the repo operations launched by the CBE to pumpliquidity for some banks starting from March 2011, net open market operations(absorption and injection) revealed liquidity-injecting operations of LE 14.5 billion atend of June 2011.1/2- Reserve Money Reserve money reached LE 251.0 billion at end of June 2011, up by LE 47.9billion or 23.6 percent during FY 2010/2011 (against LE 28.0 billion or 16.0 percenta year earlier). The increase in reserve money was reflected in a growth in currencyin circulation outside the CBE by LE 34.8 billion and in banks local currencydeposits by LE 13.1 billion. Reserve Money and Counterpart Assets* (LE mn) Balances at End of Change During the FY June 2011 2009/2010 2010/2011 Value ValueA- Reserve Money 250992 27967 47921 - Currency in circulation outside the CBE 179096 17985 34843 - Banks local currency deposits 71896 9982 13078B- Counterpart Assets 250992 27967 47921Net Foreign Assets 147197 18502 (43037)Foreign Assets 156331 25550 (42274)Foreign Liabilities 9134 7048 763Net Domestic Assets 103795 9465 90958Claims on the Government (Net) 102562 11998 21951Claims on Banks (Net) 147 28676 (28863)Net Balancing Items 1086 (31209) 97870* Derived from the CBE’s balance sheet.
4Central Bank of Egypt – Annual Report 2010/2011 As for the components of reserve money, the currency in circulation outsidethe CBE contributed most of the increase (72.7 percent), with a pickup of LE 34.8billion or 24.2 percent in the reporting year (against LE 18.0 billion and 14.2 percenta year earlier), to post LE 179.1 billion or 71.4 percent of reserve money at end ofJune 2011. Moreover, banks local currency deposits at the CBE augmented by LE13.1 billion or 22.2 percent during the year (against LE 10.0 billion or 20.4 percent),reaching LE 71.9 billion at end of June 2011. The follow-up of the developments in reserve money in the reporting yearshows that 68.0 percent of the increase was concentrated in the second half of theyear (January/June 2011), namely, the period of January 25 Revolution and itsaftermath. During January/June 2011, reserve money scaled up by LE 32.6 billion or14.9 percent. Rising by LE 25.9 billion or 16.9 percent, currency in circulationoutside the CBE made the largest impact during the said period, thus accounting for74.3 percent of its total increase during the whole year. This was ascribed to the largeamounts of banknote issued by the CBE in response to the mounting withdrawals byindividuals of their deposits at banks, on the back of the circumstances andaftereffects of January 25 Revolution. The pickup in currency in circulation outside the CBE was due to the increasein the balance of banknote issue by LE 33.9 billion or 23.2 percent during thereporting year (against a rise of only LE 18.3 billion or 14.3 percent in the previousFY) to reach LE 180.1 billion at end of June 2011. Banknote Issue* (LE mn)At End of June Balance of Change during the Year Banknote Issue Value %2007 93499 14246 18.02008 112705 19206 20.52009 127912 15207 13.52010 146220 18308 14.32011 180118 33898 23.2*Including subsidiary coins issued by the Ministry of Finance. As for the components of the issue cover, the value of gold increased by LE 4.0billion, as a result of its revaluation on 30 June 2011, to register LE 16.3 billion.Likewise, Egyptian government bonds rose by LE 9.1 billion to LE 131.6 billion. Inaddition, about LE 12.6 billion worth of foreign currencies and LE 8.2 billion worthof foreign notes were added to the issue cover. Accordingly, the structure of the coverat end of June 2011 was as follows: 73.2 percent as government bonds, 9.1 percent asgold, 13.2 percent as foreign currencies, and 4.5 percent as foreign notes.
5 Central Bank of Egypt – Annual Report 2010/2011 The breakdown of the currency in circulation outside the CBE bydenomination showed that despite the slight decrease in the relative importance oflarge denominations (LE 200, LE 100 and LE 50) as a percentage of total currency incirculation, they remained at a high level (90.5 percent against 92.1 percent at the endof June 2010). This was largely due to the climbing relative importance of the LE 200notes from 31.5 percent to 37.2 percent. By contrast, the relative importance of theLE 100 and LE 50 notes declined from 60.6 percent to 53.3 percent. This mirroredthe increasing value of transactions associated with higher prices. Currency in Circulation By Denomination* (LE mn) June 2010 June 2011 Change During the FYDenominations Relative Relative Value Importance Value Importance 2009/2010 2010/2011Total 144253 100 179096 100.0 14.2 24.2Banknote inCirculation 143947 99.8 178772 99.8 14.3 24.2PT 25 184 0.1 161 0.1 16.3 (12.5)PT 50 292 0.2 302 0.2 (4.9) 3.5LE 1 843 0.6 907 0.5 9.5 7.6LE 5 1495 1.0 2654 1.5 18.9 77.5LE 10 2844 2.0 2886 1.6 (2.3) 1.5LE 20 5480 3.8 9672 5.4 (13.0) 76.5LE 50 18704 13.0 22246 12.4 (18.3) 18.9LE 100 68641 47.6 73269 40.9 12.8 6.7LE 200 ** 45464 31.5 66675 37.2 49.0 46.7Subsidiary Coins 306 0.2 324 0.2 6.6 5.9* Representing the difference between banknote issue and cash at the CBE.** The LE 200 note has been in circulation since May 2007. The increase in the counterpart assets of reserve money in the reporting yearwas attributable to the pickup in net domestic assets and the fall in net foreign assets.Net domestic assets made a positive contribution to reserve money growth (44.8percentage points), which was held back by the negative contribution of net foreignassets (21.2 points). During FY 2010/2011, net domestic assets at the CBE went up by LE 90.9billion, against a rise of only LE 9.5 billion a year earlier, to reach LE 103.8 billion atend of June 2011. The increase came as a result of the rise in the CBE’s net claims onthe government by LE 21.9 billion (due to the pickup in its claims on the governmentby LE 39.3 billion or 26.2 percent, and in its deposits at the CBE by LE 17.4 billionor 24.9 percent). Moreover, the net balancing items had an expansionary effect onreserve money, as it went up by LE 97.9 billion shifting from a negative balance to apositive one. This was mainly ascribed to the LE 99.4 billion decline in the depositsaccepted by the CBE under the open market operations (used by the CBE to absorb
6Central Bank of Egypt – Annual Report 2010/2011excess liquidity). Furthermore, the CBE conducted Repo operations to inject liquidityfor banks as of March 2011, because of the changes in their liquidity position in lightof the higher foreign currency sales of the CBE to banks. The balance of Repooperations registered LE 16.7 billion at the end of June 2011. The CBEs net claims on banks decreased by LE 28.9 billion, as an outcome ofthe decline in its claims on banks by LE 26.4 billion. The decline in CBE claims tobanks was, in turn, caused by its lower foreign currency deposits at these banks andthe rise in banks’ foreign currency deposits with the Central Bank by LE 2.5 billionworth. Net foreign assets at the CBE rolled back by LE 43.0 billion worth or 22.6percent, against a rise of LE 18.5 billion worth or 10.8 percent, posting LE 147.2billion worth at the end of June 2011. The decline was mainly attributed to the dropof LE 42.3 billion worth or 21.3 percent in foreign assets at the CBE during the year(against a rise of LE 25.6 billion worth or 14.8 percent a year earlier), to reach LE156.3 billion worth at end of June 2011. On the other hand, foreign liabilities at theCBE augmented by the equivalent of LE 0.7 billion or 9.1 percent during the year(against a pickup of LE 7.0 billion worth) to stand at LE 9.1 billion worth at end ofJune 2011.1/3- Payment Systems and Information Technology (IT) The CBE’s efforts to develop the payment systems and information technologyhave been in progress, to bolster the soundness and stability of the financial system,reduce credit risks, expedite payment settlements, and ensure their reliability andconfidentiality. The existence of a national payment system was instrumental to thefinancial stability in Egypt, especially during the 25th of January Revolution, leadingas such to the stability of the banking system. In this respect, the following actionswere taken in FY 2010/2011:Payment Systems • Continuing to use the RTGS as a mode of interbank funds transfer and liquidity management operations, and management of banks legal reserve requirements at the CBE. The average monthly transactions settled under the RTGS system are one billion Egyptian pounds. • Managing the disbursement of pensions via ATM debit cards, with the joint efforts of the National Organization for Social Insurance (NOSI), CBE and banks working in this project. Interestingly, while NOSI branches were closed in the wake of the revolution, 90% of pensioners managed to disburse their pensions via their cards and through banks’ ATM terminals.
7 Central Bank of Egypt – Annual Report 2010/2011 • On the 1st of June 2010, the Direct Credit service in the national ACH became officially operative by the Egyptian Banks Company (EBC). The number of monthly transactions processed through this facility is about 200 thousand, and a gradual increase is expected. Moreover, preparations for the launch of the Direct Debit system are under way. It is planned that a pilot operation of this service will start in the first half of 2012. Enlarging the electronic payments base, these services will help speed up money transfers among individuals, and in turn, increase the national product. • Within the project of disbursing salaries of government employees by electronic cards, more than one million bank cards were distributed for salaries, and one million bank cards for pensions, in addition to other one million and five hundred thousand cards for pensioners, to be disbursed from the outlets of the National Organization for Social Insurance. • The CBE, in cooperation with the Ministry of Finance, has been working to shift to an electronic payment of government obligations, through banks within the ACH operations. The project aims at improving the efficiency of government procedures and tightening control over government payments. This process is expected to come on stream in the first half of 2012. • Currently, the CBE is preparing to join the ACH of the COMESA countries. Recognizing their importance for the national security of Egypt, the project aims at promoting trade with COMESA countries. In this context, the internal rules and procedures of work at the CBE are under study. In addition, signing the project-related agreements with COMESA and the Central Bank of Mauritius is currently under way.Information Technology • The CBE is in the process of developing the database of banking sector units, by setting up a data warehouse conforming to the international standards. The warehouse is designed to help the CBE sectors to have access to accurate and transparent reports, to be able to monitor the performance of the banking sector units and make informed decisions. • The establishment of a permanent Disaster Recovery (DR) site for the CBE is on track, to be functional in emergencies as an alternative to the main center at El-Gomhoria building. This is intended to ensure the continuity of IT services, in a timely and accurate manner, taking into account that the DR site should meet the international standards. The site is to be located in the CBE building in Tanta and a study was approved for this purpose. The CBE in cooperation with the project consultant are preparing the REP for the site preparation, providing that another RFP will be issued for IT equipments.
8Central Bank of Egypt – Annual Report 2010/2011 • Given the mounting risks associated with the internet banking services, the CBE embarked on a project that mandates the banks providing the services to identify and assess the weaknesses and vulnerabilities of their data networks that serve the internet banking systems and the website. Banks are also required to review the design of information security systems, and conduct security assessments with specialized companies. During this project, banks are required to conduct Vulnerability Assessment, remediate the vulnerabilities, conduct a penetration testing and submit the final results to the CBE. So far, all banks have delivered the required reports to the CBE for analyzing the data contained, and for issuing a final report with CBE recommendations. The report is expected to be released very soon. • The electronic “Auction Portal System” was introduced to automate the procedures of bidding for Treasury bill and bond auctions, and the CBE’s certificates of deposits (CDs). By virtue of this system, primary and secondary dealers can bid online, according to specific regulations, via the secure and private data network (Extranet) whereby banks and the CBE are inter- connected. • According to the plan of developing the IT systems that serve the Printing House, assistance has been provided to the Printing House to migrate their IT applications to be compatible with the other modernized systems in place at the CBE. Recognizing that upgrading the IT infrastructure at the Printing House is a prerequisite for developing the above -mentioned systems, the CBE has proceeded with studying the upgrading of the infrastructure of the IT & Communication systems serving the Printing House. • Under the plan of developing the CBE branches and modernizing their IT applications, the unification of the Bank’s accounting system is under consideration, to be generalized in all branches (Alexandria, Mohandessin & Port Said). For this purpose, preliminary steps have been taken, starting with Alexandria branch and ending with Port Said branch as scheduled. • Kasr El Nile Project: IT sector has participated in the design & supervision of the IT infrastructure that serves the building.
9 Central Bank of Egypt – Annual Report 2010/20111/3/1- RTGS and SWIFT Local Services Data on local banking transfers under the RTGS system in FY 2010/2011,applied as of mid-March 2009, showed an increase in the number and value of theexecuted messages, registering 1248.7 thousand messages at a value of LE 15879.7billion (against 1191.4 thousand messages and LE 13274.7 billion a year earlier). It isworth mentioning that these transactions include banks and clients transfers,operations of treasury bills, and Misr for Central Clearing, Depository and Registry(MCDR), in addition to corridor operations and deposits for monetary policypurposes. RTGS and SWIFT Local Services in Local CurrencyFY Change Number of Messages Value of Transfers Number Value (Unit) (LE mn)2007/2008 700668 3092401 175432 8122032008/2009 897205 5294357 196537 22019562009/2010 1191374 13274677 294169 79803202010/2011 1248692 15879701 57318 2605024 According to the statistics of the CBE Automated Clearing House, included inthe RTGS since its launch, the number of exchanged cheques increased in thereporting year to 13012 thousand (from 12994 thousand a year earlier). Likewise,their total value edged up to LE 626.8 billion from LE 584.5 billion. As a result, theaverage value per cheque inched up to LE 48.2 thousand from LE 45.0 thousand. CBE Automated Clearing House ActivityFY Number of Cheques Value of Cheques Change (thousand) (LE mn) Number Value2007/2008 11724 483113 11.9 35.42008/2009 12062 548038 2.9 13.42009/2010 12994 584546 7.7 6.72010/2011 13012 626757 0.1 7.2 Transactions executed in foreign currencies under the Fin-Copy system, viaSWIFT, showed an increase in terms of number and value. Executed transactionsreached 15.1 thousand in number, at a value of US$ 88.1 billion (against 12.2thousand at a value of US$ 70.0 billion in the previous FY).
10Central Bank of Egypt – Annual Report 2010/2011 SWIFT Local Activity in US DollarDuring FY Value of Change Number of Transfers Number Value Messages (Unit) (US$ mn)2007/2008 13925 105587 1855 265902008/2009 12365 83019 (1560) (22567)2009/2010 12204 70008 (161) (13011)2010/2011 15066 88052 2862 180441/4– Domestic Liquidity and Counterpart Assets Domestic Liquidity went up by LE 91.9 billion or 10.0 percent in 2010/2011(against LE 86.2 billion and 10.4 percent a year earlier), ending the year at LE 1009.4billion. The rise was due to the growth in net domestic assets, meanwhile net foreignassets dropped. The former increased by 13.2 percent adding to domestic liquiditygrowth. Part of the liquidity was used by banks to purchase treasury bills in theamount of LE 74.0 billion. On the other hand, net foreign assets decreased by 3.2percent. The pickup in domestic liquidity was reflected in the acceleration of moneysupply and quasi-money. Money supply augmented by LE 34.7 billion or 16.2percent (against LE 31.0 billion and 17.0 percent in the previous FY) reaching LE248.7 billion at end of June 2011. Most of the rise in the reporting year came on theback of the increase in currency in circulation outside the banking system by LE 32.7billion or 24.2 percent (against LE 17.1 billion and 14.4 percent) posting LE 167.9billion at end of June 2011. Notably, around three quarters of the rise (74.2 percent)occurred in the second half of the reporting year, in which the currency in circulationgrew by LE 24.3 billion or 16.9 percent. This can be explained by the increase in thebanknotes issued by CBE to compensate the sudden withdrawals of deposits bycustomers, in the wake of the circumstances and consequences of the 25th Januaryrevolution. Growth Rate of Domestic Liquidity by Component % 20 Money Supply Quasi-money 18 Domestic Liquidity 16 14 12 10 8 6 4 2 0 2007/2008 2008/2009 2009/2010 2010/2011
11 Central Bank of Egypt – Annual Report 2010/2011 LE demand deposits at banks rose by only LE 2.0 billion or 2.5 percent (againstLE 14.0 billion and 21.6 percent) to LE 80.8 billion at end of June 2011. The increasereflected the rise of LE 4.2 billion in the deposits of the private sector. By contrast,deposits of the public business sector decreased by LE 2.2 billion. Quasi-money accelerated by LE 57.2 billion or 8.1 percent (against LE 55.2billion and 8.5 percent in the previous FY) to stand at LE 760.7 billion at end of June2011. The pickup in LE time and saving deposits and in foreign currency depositswas behind that rise. The former increased by LE 38.4 billion or 7.0 percent to LE583.7 billion, representing 76.7 percent of quasi-money and 57.8 percent of totalliquidity at end of June. Domestic Liquidity Components End of June 2011 Local Currency Time & Saving Deposits 57.8% Foreign Currency Demand Deposits 4.1% Foreign Currency Time & Saving Money Supply Deposits Quasi-money 24.6% 13.5% 75.4% Noticeably, the surge in LE time and saving deposits of the household sector byLE 52.1 billion exceeded the overall increase recorded in this type of deposits. Theincrease in these deposits could have been larger, but for the decline in the deposits ofthe private and public business sectors (down by LE 12.5 billion and LE 1.2 billion,respectively). It is to be noted that in the second half of the year, LE time and savingdeposits retreated by LE 8.7 billion or 1.5 percent. The decline was particularly in thedeposits of the private business sector (LE 24.5 billion) and in those of the publicbusiness sector (LE 2.2 billion). However, the decline was held back by the LE 18.0billion rise in the deposits of the household sector. Foreign currency deposits by all sectors increased by LE 18.8 billion or 11.9percent (against a retreat equivalent to LE 9.1 billion or 5.4 percent) to reach LE177.0 billion or 23.3 percent of total quasi-money at end of June 2011. The increasewas entirely achieved in the second half of the year, in which deposits scaled up bythe equivalent of LE 18.9 billion or 12.0 percent.
12Central Bank of Egypt – Annual Report 2010/2011 Against these developments, foreign currency deposits/total deposits(dollarization ratio) inched up from 20.21 percent at end of June 2010 to 21.03percent at end of June 2011. This reflected the propensity for saving in foreigncurrencies, especially given the uncertainty about the LE fluctuations due to theevents in Egypt following the 25th January revolution. However, this trend issomewhat limited, noting that LE time and saving deposits of the household sectorstill accounted for the bulk (almost 65.8 percent) of total quasi-money at end of June2011. Contribution of Counterpart Assets to Domestic Liquidity Growth RateIn the year ending June 2008 2009 2010 2011Domestic Liquidity Growth Rate (%) 15.7 8.4 10.4 10.0Net Foreign Assets (%) 12.8 (6.5) 3.4 (3.2)Net Domestic Assets (%) 2.9 14.9 7.0 13.2 Domestic Credit rose by LE 117.5 billion or 15.2 percent in the reporting year(against LE 79.9 billion or 11.5 percent a year earlier) ending the year at LE 892.8billion. About three quarters of the increase (74.6%) was realized in the second halfof the year, as domestic credit moved up by 10.9 percent or LE 87.7 billion, of which82.8 percent was directed to the government sector. Domestic Credit by Sector (End of June) LE bn Household Sector 1000 Private Business Sector 900 Public Business Sector 800 Gov. Sector (Net) 700 600 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 Receiving around 94.6 percent of the rise in domestic credit, the share of thegovernment (including public economic authorities) increased/surged by LE 111.2billion or 34.1 percent (against LE 53.0 billion or 19.4 percent) posting some LE437.3 billion or 49.0 percent of total credit at end of June 2011. Such an increasereflects the rise in banks’ holdings of government securities by LE 102.4 billion, andin loans to the government by LE 30.7 billion, on the one hand and the pickup in itsdeposits by LE 21.9 billion, on the other hand.
13 Central Bank of Egypt – Annual Report 2010/2011 Credit disbursed to the household sector climbed by LE 6.4 billion or 6.9 percent(against LE 8.2 billion and 9.7 percent) bringing its indebtedness to LE 99.2 billion or11.1 percent of total domestic credit at end of June 2011. The share of public businesssector also picked up by LE 3.0 billion or 10.0 percent (against a decline of LE 3.2billion or 9.5 percent in the previous year, due to the settlement of non-performingloans) ending the year at LE 33.0 billion. Credit to the private business sector rolledback by LE 3.1 billion or 1.0 percent (against an increase of LE 21.9 billion or 7.2percent) lowering its debts to banks to LE 323.2 billion or 36.2 percent of total creditat end of June 2011. Relative Structure of Domestic Credit (End of June 2011) 11.1 49.0 36.2 3.7 Gov. Sector (Net) Public Business Sector Private Business Sector Household Sector Net foreign assets at the banking system (denominated in local currency)declined by LE 28.9 billion or 10.2 percent (compared to a surge of LE 28.3 billion or11.1 percent), ending the year at LE 253.5 billion. Noticeably, the decline occurred inthe second half of the year, where net foreign assets fell by LE 51.8 billion. Yet, therise of LE 22.8 billion in the first half of the year had somewhat mitigated such adecline, which came as a result of (i) the drop in net foreign assets at CBE by LE 43.0billion (due to the LE 42.3 billion fall in its foreign assets, and the LE 0.7 billion risein its foreign liabilities) and (ii) the build up of net foreign assets at banks by LE 14.1billion. The decrease in the CBE’s net foreign assets is traced to the necessary financethe Central Bank had to provide to meet part of the foreign capital repatriation, in theaftermath of the Egyptian revolution.
14Central Bank of Egypt – Annual Report 2010/2011 Foreign Asse ts & Liabilities of the Banking Syste m at End of June LE bn Foreign Assets 400 Foreign Liabilities 300 200 100 0 2007 2008 2009 2010 2011 Net balancing items exerted an expansionary effect on domestic liquidity of LE3.3 billion. This was brought about by the increase in capital accounts by LE 24.3billion, coupled with a decrease in inter-bank net credit and debit positions by LE15.2 billion, and in net unclassified assets and liabilities by LE 5.8 billion.1/5- Supervision Sector Being the regulator of banks in Egypt, the CBE seeks to ensure the soundnessof banks’ financial positions and evaluate their performance from the perspective ofrisk-based supervision. In addition, it ascertains banks’ compliance with theestablished regulatory standards, including the minimum reserve requirement andliquidity ratios, the maximum limits of a bank’s exposure to a single customer alongwith his related parties, and exposures abroad, as well as the asset-liability matchingin terms of maturity and currency. This is in addition to a number of qualitativestandards that ensure the soundness of banks’ performance and the safety ofdepositors’ funds, including governance rules; information systems efficiency rules;and eligibility and competency criteria for officials and managers of key sectors atbanks. The implications of the recent international financial crises bore out that theinstructions and reform policies adopted by the CBE to restructure banks, raise theircapital and strengthen their risk management systems were instrumental in containingthe effects of these crises. Moreover, the CBE had thoroughly monitored the financialcrises in many countries, especially in the euro zone, so as to be capable of makingimmediate decisions - when necessary - to counteract the spillovers in due time.
15 Central Bank of Egypt – Annual Report 2010/2011 Hereunder are the decisions taken by the CBE over the last quarter of FY2010/2011 and the period that followed: 1. Providing banks with Quantitative Impact Studies (QIS) under Pillar II regarding liquidity, concentration risks, and to launch pilot testing before issuing related supervisory instructions. 2. Allowing banks –in response to the extraordinary events in the Egyptian stock market– to reclassify financial assets held for trading from January 1st till the end of June 2011. 3. Enhancing the bank’s concentration risk management through issuing a regulation that sets exposure limits to countries, financial institutions (banks) and financial groups abroad. 4. Requiring banks to open an account under the name of "Zewail City for Science and Technology" to accept donations for this project, and another account to raise donations for the eradication of slums. Received donations shall be transferred to the two accounts created by the CBE for the same purpose. The CBE issued a number of instructions during FY 2010/2011, which aremainly: 1. Underpinning and supporting the banking sector to help it face the current event or current crisis through issuing a regulation that: a. Offer special treatment to retail and corporate loans in light of the current crisis. b. Postpone the deduction of additional impairment on the excess of banks’ investments in non-financial companies over 40% of the company’s issued capital. 2. Directing banks to decrease the concentration of loans and advances in the form of overdrafts. 3. Extending cash cover exemptions on all meat, poultry and sugar imports – by merchants (for trading purposes) or by government entities – from the 50 percent minimum cash cover requirement till end of December 2011.
16Central Bank of Egypt – Annual Report 2010/2011 4. Setting limits on transfers abroad and cash withdrawals by individuals, as well as requiring banks to submit weekly statements on loan balances, client deposits, and the two liquidity ratios and daily statements on cash withdrawals/deposits, and inward/outward external transfers. 5. Postponing the consideration of requests from banks in Libya – submitted on behalf of their customers – to liquidate their letters of guarantee issued for investment projects, until the political landscape improves in Libya. Seeking to enhance governance rules in the banking system, the CBEs Boardof Directors approved - on its session of 6 April 2004 –competency criteria forchairmen, board members and executive managers of banks, to make sure that theyare qualified for their posts. Competency criteria were modified on 24 November2009, where a new criterion was introduced, prohibiting any official tosimultaneously combine between two positions as a senior manager in a bank and amember of the board of directors of another bank. The new criterion was applicableto future nominations, with the exception of those banks entirely owned by a bank. Itintended to prevent any conflict of interests, in compliance with good governancepractices. In addition, interviews are made with the chairmen, deputy chairmen,managing directors, executive board members of banks and executive directors toensure their eligibility for the positions they are nominated for, with a particularattention being paid to candidates for risk- and compliance-related positions. As for foreign nominees at banks (board members and executive directors), acriterion was set, whereby the regulatory authority of the parent bank, or the last bankthe nominee has worked in (as the case may be) is to be consulted about thatnominee, to identify his/her eligibility for the vacant position. In this context, theregister of banks witnessed the addition of five chairmen, five vice-chairmen, threemanaging directors, four executive board members, twenty six non-executive boardmembers, two specialized members, a regional manager for a foreign bank branch, aregional deputy manager for another foreign bank, seven chief executive officers forrepresentation offices in Egypt, one general manager and one executive director in abank, and two executive directors at risk, compliance, credit, investment, treasury andinternal inspection departments. In light of the study conducted on some of the banks statutes relating to theperiodicity and location of board meetings of banks, the CBE Board of Directorsagreed, on its session dated 20 June 2009, to allow board meetings to be held outsideEgypt only once during the fiscal year on exceptional basis. On the other hand, amendments to certain articles of the statute of elevenbanks, and the addition of 86 new branches of 24 banks were recorded in the registerof banks.
17 Central Bank of Egypt – Annual Report 2010/2011 In line with the policy of the CBE that promotes the growth and geographicalexpansion of banks by opening small branches, a number of standards and regulationswere proposed and are currently raised to the senior management for approval afterstudying the experiences of several countries, such as the United States, Japan, Chinaand Saudi Arabia, to choose the most optimal and appropriate one for the Egyptianmarket. The said branches shall provide a number of specific services. These areexclusively the following: • Conducting withdrawal/deposit operations, and currency conversion trans- actions via ATMs. • Receiving and sending requests to the concerned departments in the bank to complete their procedures. • Offering installment credit for the purchase of durable goods. • Marketing and promoting bank products. A benchmark of LE 10 million of a banks core capital was set for each smallbranch. The working hours of each branch shall be determined according to therequirements of its location. Staff head count of each branch shall not exceed threequalified persons. The CBE is currently in the process of updating the rules of examining thedocuments required from the houses of expertise (that are qualified for participatingin the evaluation of guarantees provided to banks) to be listed in the register ofhouses of expertise at the CBE (63 houses of expertise were listed so far). This step isbound to raise the efficiency and effectiveness of the credit decisions made by banksto prevent the recurrence of the problem of nonperforming loans. Moreover, theauditors authorized to audit the financial statements of banks shall be registered in aspecial register, in conformity with specific criteria that ensure a satisfactory degreeof efficiency and expertise. 30 new auditors were recorded during the reporting year. Recently, banks have been eager to provide e-banking services to keep pacewith the technological progress in this field. Such services are either traditional orinnovative (effected via electronic networks) and had been regulated earlier by therules issued by the CBE Board of Directors on 28 February 2002. Later, on 2February 2010, the CBE Board of Directors approved the regulations governing theoperation of payment orders via mobile phones in Egypt. Furthermore, the CBE hasproceeded with updating the rules of internet banking, so as to reduce the risksinherent in e-banking services. It is worth mentioning that six banks were licensed, during the reporting year,to introduce electronic bill payment service via the ATM and branches, incooperation with Fawry Company for Banking and Payment Technology Services.
18Central Bank of Egypt – Annual Report 2010/2011 The CBE allowed banks to participate in the establishment of the differenttypes of mutual funds, to cater for risk-averse investors who have cash money butlack the necessary experience, know-how, or time to invest in such tools that yieldgood returns. Nine banks were given approval to start procedures for establishing 11new mutual funds. In order to encourage individuals to save, registered banks were allowed toissue saving systems of three years or more, with some privileges, to be able to raisetheir market interest rates above the short-term interest rates. Also, banks werepermitted, during this year, to issue new saving vessels and to make adjustments tothe existing ones, with the aim of increasing the volume of medium- and long-termsavings, to help banks finance production and industrial enterprises. To organize dealing in the forex market in Egypt and maximize savingsreceived from workers abroad, off-site supervisions are exercised on forex dealers,and money transfer companies in Egypt, in accordance with the Law governing theCentral Bank, Banking Sector and Money Market. In this respect, it is worthy to note that while the report is being prepared, threenew companies, and 24 branches were registered as currency exchangers, thusbringing their total number to 448 nationwide. Moving to tourism services, the CBE – pursuant to the above-mentioned Law –has licensed shops within customs areas at airports to sell in foreign currencies aswell as Egyptian pounds, to cover part of the State’s needs of foreign currencies andencourage tourism. As such, nine shops in free zones were granted such a license,bringing their total number to 79 shops at the end of the preparation period of thereport. As part of the ongoing efforts made by the General Department for Credit RiskPooling to enhance the efficiency and transparency of the credit registration system,the following steps were taken: • An extensive meeting was held on 15 July 2010, attended by bank officials, to discuss the data received by the department. The aim of the meeting was to pinpoint the problems and difficulties facing banks when sending data, and the precautionary actions to be taken in this respect, to ensure that informed credit granting decisions be made. • The provision of more detailed information on customers of judicial procedures and settlements was considered. Also considered was separating the debt settlement customers from those of rescheduling debt when notifying banks of the positions of these customers, to set regulatory standards and rules, and make modifications in line with the changes and conditions of the banking sector.
19 Central Bank of Egypt – Annual Report 2010/2011 In view of the current circumstances, the Department for Credit Risk Poolinghas continued to perform its usual duties. To elaborate, the Department receivesbanks statements on the volume of credit facilities granted thereby to customers, onthe CBEs website, prepares the aggregate positions of those customers, as well as thememorandums to be presented to the senior management, and responds to thecomplaints filed by bank customers pertaining to credit risk information. As regards on-site supervision, the CBE made great progress with the2010/2011 plan for the inspection of the banking sector units (banks) and currencydealers. Under this plan, each bank is inspected (either in whole or in part) on anannual basis, according to the level of its risks and the quality of its products andactivities. Moreover, an examination of certain issues is made, to help take immediatecorrective actions as deemed necessary, needless of waiting for the full inspection ofthose banks to be carried out. In addition, the system of specialization-basedexamination was adopted to enable bank inspection to be conducted by inspectorsspecialized in the relevant activities (e.g. retail banking, market risks, IT, etc.). Thatapproach is meant to render the inspection process more effective and in-depth byproviding a thorough risk profile of the inspected bank. In this context, a core teamwas formed to follow up and manage IT systems, in collaboration with off-sitesupervision. The aim is to identify common risk areas at banks, especially those ofhigh incidence, and monitor progress on the execution of corrective actions. Inspection reports made lately have helped to upgrade the risk managementframework in several banks and further the application of the international bestpractices in this area. Furthermore, the main concern as of February 2011 was to check on thetransfers made by Egyptian banks, guided in this respect by the relevant instructionsof the CBE - in cooperation with the departments concerned - in the aftermath of thelatest events that hit the country. Moreover, the CBE continued to update bankinspection reports under the usual plan, taking into account the said circumstances. On the other hand, the Supervision Sector at the CBE continued to cooperatewith the supervisory and judicial authorities in settling a number of money andbanking issues. Moreover, the Sector examines the complaints filed by bankcustomers and provides the required banking expertise.
20Central Bank of Egypt – Annual Report 2010/20111/6- Banking Sector Reform In continuation of the banking reform program, launched in September 2004,the Central Bank has finalized the preparations for the second phase (2009 - 2011).This phase aims at raising the efficiency and soundness of the Egyptian bankingsector, and enhancing its competitiveness and ability for risk management, so that itcan perform its role in financial intermediation in support of the national economy,and availing/achieving the targeted development. The reform program is based on anumber of pillars, namely: • Preparing and implementing a comprehensive program for the financial and administrative restructuring of specialized state-owned banks (the Principal Bank for Development and Agricultural Credit, Egyptian Arab Land Bank, and Industrial Development and Workers Bank of Egypt), which is expected to positively affect the performance of said banks. • Following up periodically on the results of the first phase of restructuring commercial state-owned banks, the National Bank of Egypt (NBE), Banque Misr (BM) and Banque du Caire (BdC). The follow up showed that the first phase of the banking sector reform program (2004/2008) had already borne fruit and positively affected the performance of those banks. In the second phase, all requirements necessary for enhancing the efficiency of said banks in terms of financial intermediation, risk management, human resources, and IT, would be met to ensure the continued improvement of their financial performance and competitiveness. • Applying Basel II standards in Egyptian banks to enhance their risk management practices. In this context, a protocol had been signed with the European Central Bank and seven European central banks to provide a three- year technical assistance program launched on 1 January 2009, to implement Basel II requirements in the Egyptian banking sector. It is worthy to note that the strategy of the CBE in implementing Basel II framework, which was announced for Egyptian banks and the relevant parties in an extensive meeting held on Oct. 2009, is based on two main principles; simplicity and consultation with banks, to ensure banks’ compliance with these standards. According to the above-said strategy, Basel II standards should be phased in over the following stages: - The first stage (January - June 2009) focused on the capacity building of the CBE’s core team and elaboration on the Egyptian strategy for Basel II implementation.
21 Central Bank of Egypt – Annual Report 2010/2011 - The second stage (July 2009 - June 2011) - the pivotal phase of the reform program - covers extensive coordination with the banking sector, through discussion papers related to the most important topics and selection of the most appropriate methods for application in Egypt, taking into consideration similar experiences in other countries that have implemented Basel II. Moreover, the quantitative impact of the possible consequences of Basel II standards will be measured before the mandatory application. - The third stage (July - December 2011) will focus on the fine-tuning of future supervisory regulations related to Basel II, taking into account the legal aspects and development of corrective action plans commensurate with the different types of banks, according to the simulation results for each bank, on a case by case basis. Also, a parallel run of existing regulations and Basel II will be applied upon issuance, and a new data warehousing framework will be implemented to support the future updated supervisory regime. - The fourth stage (implementation is under way) - a parallel run of Basel II and existing regulations concerning capital adequacy will be applied upon issuance. Moreover, the data warehousing framework will be completed.• Adopting an initiative promoting the development and growth of banking activities/services, to finance various sectors, especially small- and medium- sized enterprises (SMEs). In this context, to encourage banking credit to small- and medium-sized enterprises (SMEs), the CBE exempted banks deposits - equivalent to the size of loans extended thereby to finance SMEs - from the reserve requirement ratio (14 percent). It is noteworthy that poor access to adequate, timely and reliable statistical data and information is one of the main obstacles to the development and finance of small- and medium-sized enterprises (SMEs). Hence, the Central Bank of Egypt and the Egyptian Banking Institute (EBI), in collaboration with the Central Agency for Public Mobilization and Statistics (CAPMAS), embarked on a field survey of small - and medium-sized enterprises (SMEs) covering all the governorates of Egypt, on the basis of the full count approach. The first stage, conducted in Al Sharqiya Governorate, had been completed, and in the light of its results, the survey was carried out in the rest of the governorates. It is worthy to mention that twenty other governorates were surveyed up to June 2011. According to the findings, a database will be set up and be periodically updated. During the period of preparing this report, all governorates were covered and the database is expected to be inaugurated in February 2012.
22Central Bank of Egypt – Annual Report 2010/2011 • Reviewing and strictly applying international governance rules to the Egyptian banking sector and the CBE. In this context, regulations on bank governance were approved by the CBE Board, with the aim of helping banks to set/develop their governance systems. As such, each bank shall apply these regulations in accordance with the volume and complexity of its activities and strategy, as well as risk management ability. Before issuing the said regulations, they were submitted to officials in the Egyptian Financial Supervisory Authority (EFSA) within the framework of coordination of the regulatory authorities of the financial sector. Preparations for the second phase of the banking reform program haveproceeded, following the successful implementation of the first phase, which wascentered on four pillars: (1) consolidation and privatization of the banking sector, (2)financial and managerial restructuring of state-owned banks, (3) addressing the non-performing loans issue, and (4) upgrading the Supervision Sector at the CBE. As for the first pillar, some voluntary and state-forced mergers took place,leading to a decrease in the number of banks operating in Egypt from 57 at end ofDecember 2004 to 39 banks at end of December 2008 and the number is still thesame thus far. Under this program, 80 percent of the share capital of the Bank ofAlexandria was sold to Italy’s Sanpaolo Bank, besides the divestiture of theshareholdings of state-owned banks in a number of joint venture banks. With respect to the second pillar, state-owned banks were restructured under acomprehensive and time-lined plan, designed by the Banking Reform Unit at theCBE. The plan was intended to develop all departments and technological systems,besides establishing new departments, particularly for risk management, informationtechnology (IT), and human resources. To this end, a project on the application of theinternational best practices - implemented with the assistance of foreign consultants -was completed on time. In addition, a full audit of state-owned banks was conductedaccording to international accounting standards, covering the years from 2004 to2008. Finally, the recruitment of highly qualified banking cadres and seniormanagement at state-owned banks (financed by the Banking Reform Fund) enabledthose banks to push ahead with reform and development. Concerning the third pillar, to address the problem of non-performing loans,the CBEs NPL Management Unit worked out a variety of approaches and programsthat helped settle more than 90 percent of NPLs (excluding debts of the publicbusiness sector). With regard to the non-performing loans of public business sectorenterprises to public banks, about 62 percent was repaid in cash to the publiccommercial banks. As for the remaining debts (38 percent), an agreement was signedon 14/9/2009, whereby in-kind repayment of the remaining debt was made by the endof June 2010.
23 Central Bank of Egypt – Annual Report 2010/2011 As to asset quality indicators at banks, the ratio of non-performingloans/total gross loans decreased from 13.6 percent at end of FY 2010 to 11 percentat end of FY 2011, due to the fact that state-owned banks wrote off a number of non-performing loans. Moreover, provisions/total non-performing loans increased from92.5 percent to 93.6 percent. A program to reform the Supervision Sector was devised to achieve thefollowing targets: enhance the efficiency of this sector by benefiting frominternational best practices, and apply the concept of risk-based supervision to ensurethe sector’s robustness and soundness. Furthermore, efforts were exerted to recruithighly qualified staff versed in advanced technology, enhance the efficiency ofhuman cadres to be capable of managing this key sector, and upgrade themanagement information system (MIS) to ensure timely access to accurate data. Inthis context, a technical assistance program in collaboration with the EuropeanCentral Bank (ECB) and four European central banks, was completed in the lastquarter of 2007. It is noteworthy that the successful and timely implementation of the firstphase of the CBEs banking reform program has enabled this sector to weather theadverse effects of the global financial crisis and deal properly with the currentcircumstances.1/7- Management of the Foreign Exchange Market and International Reserves1/7/1- Foreign Exchange Market and Dollar Interbank The Central Bank of Egypt (CBE) kept up its successful management of theforeign exchange market through the dollar interbank system. Succeeding earlier inweathering the pass-through effects of the international financial crisis, the marketproved for the second time resilient and effective in the face of the post-revolutioneconomic crisis, which is responsible of the noticeable reduction in foreigninvestments in the second half of the reporting year. The market performance washighly instrumental in shielding the LE exchange rate from any sharp fluctuations, asthe weighted average of the US dollar interbank rate posted LE 5.9690 at end of June2011 (against LE 5.8496 at end of January), signifying that the decline in the value ofthe Egyptian pound (2.0 percent) was less than expected by international institutions.Subsequent to the reporting period, the US dollar exchange rate posted LE 6.0319 atend of December. All this undoubtedly shored up investors’ and dealers’ confidencein the efficiency and credibility of the Forex market, thus promoting market stabilityand staving off any fears or disruptions, besides subduing the impact of the crisis onthe economy, and bettering its prospects for recovery. Considering the FY 2010/2011as a whole, the Egyptian pound depreciated by 4.6 percent versus the US dollar.
24Central Bank of Egypt – Annual Report 2010/20111/7/2- International Reserves Affected by the events occurring in Egypt in the second half of the year, NIRwith the CBE shrank by US$ 8.6 billion or 24.6 percent in FY 2010/2011, ending theyear at US$ 26.6 billion (compared with US$ 36.0 billion at end of December 2010,and US$ 35.2 billion at end of June) as the decline in January/June 2011 reached US$9.4 billion or 26.2 percent). The decline was sparked by the dramatic events in Egypt,which took their toll on the receipts of foreign currencies. Tourism revenuesdwindled by 47.5 percent in the second half of the year, compared with the first.Moreover, for the first time, FDI registered a negative record low of US$ 65 million,whereas the portfolio investment unfolded a net outflow of US$ 7.1 billion. Despitethe drop in NIR, they covered 6.3 months of merchandise imports at end of June2011. While the report was under preparation, NIR declined further, standing at US$18.1 billion at end of December (equivalent to 3.7 months of merchandise imports). Net International Reserves & Months of Merchandise Imports End of June ( Months ) (US$ bn) 36 12.0 30 10.0 24 8.0 18 6.0 12 4.0 6 2.0 0 0.0 2005 2006 2007 2008 2009 2010 2011 NIR NIR/Months of Merchandise Imports1/8- Domestic and External Public Debt1/8/1- Domestic Public Debt During FY 2010/2011, domestic public debt stood at LE 1044.9 billion at endof June 2011 (76.2 percent of GDP at current market prices), up by LE 156.2 billionor 17.6 percent. It is noteworthy that domestic public debt consists of the sum of netgovernment debt, public economic authorities debt and debt of the NationalInvestment Bank (minus intra-debt of both public economic authorities and thegovernment to the NIB).
25 Central Bank of Egypt – Annual Report 2010/2011 Gross Domestic Public Debt at End of June 2011 (LE bn) Gross Dom estic Debt 1044.9 Intra-Debt -67.7 NIB Debt (Net) 238.2 Net Debt of Econom ic Authorities (Net) 66.3 Net Dom estic Debt of the Governm ent 808.1 -200 0 200 400 600 800 1000 12001/8/1/1-Debt of the Government (Net) The governments domestic debt (net) amounted to LE 808.1 billion at end ofJune 2011(58.9 percent of GDP), up by LE 144.3 billion or 21.7 percent. The risewas induced by the LE 137.7 billion increase in the balances of Treasury bonds andbills and the LE 4.6 billion decline in the credit position of net government balancesat the banking system (due to the increase in government loans and deposits by LE19.2 billion and LE 14.6 billion, respectively). Another factor behind the accelerationof government debt was borrowing from other local entities in the amount of LE 2.0billion.
26Central Bank of Egypt – Annual Report 2010/2011 Domestic Debt of the Government (Net) (LE bn ) Balances at End of June 2010 June 2011 Change (+) - Value % Value % 2010/2011Government Domestic Debt (Net) 663.8 100.0 808.1 100.0 144.3- Balances of Bonds & Bills* 779.2 117.4 916.9 113.5 137.7 • Notes and bonds, of which: 513.1 77.3 560.8 69.4 47.7 Tradable on exchanges 169.7 25.6 218.5 27.0 48.8 • Treasury bills 266.1 40.1 356.1 44.1 90.0- Borrowing from Other Entities - - 2.0 0.2 2.0- Credit Facilities from SIFs 2.4 0.3 2.4 0.3 -- Net Balances at the Banking System -117.8 17.7 -113.2 -14.0 4.6 • Credit facilities 26.8 4.0 46.0 5.7 19.2 • Deposits 144.6 21.8 159.2 19.7 14.6Net government domestic debt/GDP (%) 55.0 58.9Source: Ministry of Finance, CBE, and NIB.Ratios are calculated in terms of LE million.∗ Including treasury bonds; housing bonds; bonds denominated in foreign currencies with public commercial banks; the 5 percent ratio retained from the profits of corporations subject to Law No. 97 of 1983 for the purchase of government bonds; the holdings of resident financial institutions (banking system and insurance sector) of bonds floated abroad; and the SIFs bonds against transferring NIB debt to the Public Treasury. The increase of LE 137.7 billion in the balances of government bonds and billswas an outcome of the following developments:A- The rise in the balance of government bonds by LE 47.7 billion, to LE 560.8 billion at end of June 2011, as a result of:1- The LE 47.0 billion increase in the Egyptian treasury bonds because of: • The issuance of treasury bonds at a value of LE 49.5 billion in July/December 2010, and LE 7.5 billion worth in January/March 2011; and • The redemption of Egyptian treasury bonds at a value of LE 10.0 billion (LE 6.0 billion falling due in July/December 2010, and LE 4.0 billion in February 2011).2- The issuance of 10-year treasury bonds (non-interest bearing) at a value of LE 9.1 billion on 1 July 2010.3- The issuance of a treasury bond for the benefit of the Social Insurance Fund for workers in the government sector at a value of LE 1.8 billion on 30 June 2011.4- The LE 1.7 billion rise in the net balance of Euro bonds denominated in USD & treasury bonds.
27 Central Bank of Egypt – Annual Report 2010/20115- The amortization of foreign currency bonds at public commercial banks at a value of US$ 2090.2 million or LE 11.9 billion worth at end of June 2010.B- The rise in the outstanding balance of treasury bills by about LE 90.0 billion, to LE 356.1 billion at end of June 2011, from LE 266.1 billion at end of June 2010. LE bn % Net Domestic Debt by the Government 1000 70 800 60 600 50 40 400 30 200 20 0 10 -200 0 June 2009 June 2010 June 2011 Treasury Bills Bonds& Other Credit Facilities Net Governm ent Balances With the Banking System Ratio of Governm ent Debt / GDP1/8/1/2- Debt of the Public Economic Authorities (Net) In FY 2010/2011, net debt of the public economic authorities went down byLE 1.5 billion to LE 66.3 billion at end of June 2011. The fall was traceable to thedecrease in the their net borrowing from the banking system by LE 2.2 billion(because of the rise in claims thereon and in their deposits by LE 7.9 billion and LE10.1 billion), in addition to the rise in their borrowing from the National InvestmentBank by LE 0.7 billion.1/8/1/3- Debt of the National Investment Bank (Net) Debt of the NIB (including intra-debt) mounted to some LE 238.2 billion atend of June 2011, up by LE 16.0 billion in the reporting year. The rise was a twofoldeffect of the expansion in the NIBs total invested resources by LE 13.1 billion to LE240.9 billion at end of June 2011, and the decline in its deposits at the bankingsystem by LE 2.9 billion.
28Central Bank of Egypt – Annual Report 2010/20111/8/1/4- Intra-Debt Intra-debt of public economic authorities and the government to the NIBreached some LE 67.7 billion at end of June 2011, against LE 65.1 billion at end ofJune 2010. Loans extended by the NIB to these authorities registered about LE 52.2billion, with an increase of LE 0.7 billion in the reporting year, while NIBsinvestments in government securities (bills and bonds) amounted to LE 15.5 billion,up by LE 1.9 billion. Resources of the NIB at End of June 2011 Uses of the NIB at End of June 2011 (LE bn) (LE bn) Dollar Dev elopment Bonds & Others Inv estments in Deposits with the Post Office Loans to Treasury Bills & Banking System Sav ing Account 2.9 Economic Bonds 15.5 2.7 72.0 Authorities 52.2 Social Insurance Funds 62.6 Proceeds of Inv estment Loans to Holding Certificates & Companies & Accumulated Affiliate Units, Interest 103.4 Concessional Lending & Others 170.51/8/2- External Debt∗ Outstanding external debt (public and private - all maturities), denominated inUS dollar, increased by about US$ 1.2 billion, to US$ 34.9 billion at end of June2011, as compared to the end of June 2010. The increase was due to : • The pickup in most currencies of borrowing versus the US dollar by US$ 2.4 billion worth. • The decline in the stock of Egyptian bonds and notes issued in global markets, owing to the purchase of a portion of them (US$ 242.0 million worth) by resident entities. • Net repayments of loans and facilities amounting to approximately US$ 1.0 billion .∗ The structure of Egypt’s external debt, according to currencies of borrowing, is considered one of the main indicators employed by the CBE to determine the structure of international reserves by currency.
29 Central Bank of Egypt – Annual Report 2010/2011 External Debt and Debt Service End of June US$ bn US$ bn 35.0 3.2 30.0 3.1 3.0 25.0 2.9 20.0 2.8 15.0 2.7 2.6 10.0 2.5 5.0 2.4 0.0 2.3 2005 2006 2007 2008 2009 2010 2011 External Debt Debt Service (right axis) Turning to external debt service (medium- and long-term), debt servicepayments accelerated by US$ 158.4 million, posting about US$ 2.8 billion in FY2010/2011, compared with the preceding FY. The acceleration reflected the rise inprincipal repayments by US$ 174.7 million to US$ 2.1 billion, and the retreat ofnearly US$ 16.3 million in interest payments to about US$ 636.2 million. Medium and Long-Term External Debt Service US$ mn. during Fiscal Years 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Principal Interest Total The public sector was the major obligor (official debt), with a share of US$33.0 billion or 94.5 percent of total external debt, while the private sector accountedfor US$ 1.9 billion or 5.5 percent at end of June 2011. Below is the distribution of external debt by:1- Maturities2- Debtors3- Main currencies4- Main creditors
30Central Bank of Egypt – Annual Report 2010/2011 1- External Debt by Maturity The breakdown of external debt by maturity indicates that medium- and long-term debt (guaranteed and non-guaranteed) accounted for 92.1 percent (US$ 32.1billion) of external debt at end of June 2011, of which long-term and medium-termdebt represented US$ 31.6 billion and US$ 494.0 million, respectively. Short-termdebt constituted 7.9 percent or US$ 2.8 billion of the total debt. Around US$ 17.5 billion of medium- and long-term loans (50.1 percent of thetotal debt) were owed to Paris Club members, in the form of bilateral loans(rescheduled or non-rescheduled), and suppliers’ and buyers’ credit. Debt to countriesother than Paris Club members amounted to US$ 1.0 billion (2.9 percent) at end ofJune 2011. External Debt Structure End of June 2011 Private sector (Non-guaranteed) Short-term debt 0.1% 7.9% Egyptian bonds and notes 8.1% Rescheduled International & bilateral debts regional 36.9% organizations 30.9% Suppliers & buyers Other bilateral debts credits 15.0% 1.2% Debt to international and regional organizations posted some US$ 10.8 billion,or 30.9 percent of the total at end of June 2011 (the public sector owed 99.1 percent). The balance of Egyptian bonds and notes (held by non-residents) reached US$2.8 billion (8.1 percent). That figure comprises US$ 1.3 billion of guaranteedgovernment securities falling due in September 2015; US$ 186.9 million of sovereigndollar bonds, reaching maturity in July 2011; and US$ 343.4 million worth ofgovernment bonds issued in LE abroad and falling due in July 2012. This is inaddition to the bills issued in April 2010, in the amount of US$ 1.0 billion, falling dueas two tranches in April 2020 and 2040. Non-guaranteed debt of the private sector registered US$ 17.5 million (0.1percent of total external debt). Short-term debt (7.9 percent) rolled back by 6.7percent to some US$ 2.8 billion (65.6 percent of which was owed by the privatesector). The decline resulted from the fall in the short-term deposits of non-residentsby 28.5 percent to US$ 972.7 million, and the rise in short-term trade facilities by11.9 percent to US$ 1.8 billion.
31 Central Bank of Egypt – Annual Report 2010/2011 2- External Debt by Debtor The breakdown of external debt by debtor at end of June 2011 showed that thestock of debt of the central government scaled up by US$ 842.9 million to US$ 27.1billion, of other sectors by US$ 367.4 million to US$ 4.6 billion, and the monetaryauthority by US$ 239.8 million to US$ 1.5 billion (including a rise of US$ 1.2 billionin long-term obligations, to provide for the IMFs allocations of SDRs for Egypt). Bycontrast, the debt of banks decreased by about US$ 238.6 million to US$ 1.7 billion. External Debt by Debtor (US$ billion) June 2011 June 2010 entral & Monetary Monetary Central & Authority Local Authority Local 1.3 ov ernme 1.5 Gov ernme nt Banks 27.1 nt 2.0 Banks 26.2 1.7 Other Other Sectors Sectors 4.6 4.2 Nonetheless, the above-mentioned developments had no significant effect onthe structure of external debt by debtor, as the central government remained the majorobligor, with a share of 77.6 percent at end of June 2011, followed by the othersectors (13.1 percent), banks (5.0 percent) and the monetary authority (4.3 percent). 3- External Debt by Currency The distribution of external debt by main component currencies manifestedthat the US dollar was the main currency of borrowing, with a relative importance of39.4 percent because of outstanding obligations in US dollar owed to creditors otherthan the USA. The Euro came next (28.8 percent), followed by the Japanese yen(12.8 percent), the SDRs (7.5 percent) and the Kuwaiti dinar (6.1 percent).
32Central Bank of Egypt – Annual Report 2010/2011 External Debt by Major Currencies End of June 2011 Kuw aiti dinar Japanese yen 6.1% 12.8% Euro 28.8% Egyptain Pound 1.7% SDRs 7.5% Sw iss franc 1.8% Other currencies US dollar 1.9% 39.4% 4-External Debt by Creditor The breakdown of external debt by creditor revealed that 42.9 percent of thetotal debt was owed to the four main Paris Club members; namely Japan (12.2percent), Germany (11.0 percent), France (10.7 percent) and USA (9.0 percent). Onthe other hand, the Arab countries combined accounted for 4.6 percent and the maincreditors were Kuwait (2.3 percent), Saudi Arabia (0.9 percent) and the UAE (0.5percent). External Debt by Creditor USA Egy ptian bonds 9.0% and notes 8.1% France 10.7% International June organizations 2011 30.9% Japan 12.2% Other countries Germany 10.8% 11.0% United Kingdom Arab Countries 2.7% 4.6%
33 Central Bank of Egypt – Annual Report 2010/2011 External Debt by Creditor (US$ mn) June 2010 June 2011At End of Value Relative Value Relative Importance ImportanceTotal External Debt 33694.2 100.0 34905.7 100.0USA 3431.1 10.2 3132.5 9.0Japan 4005.2 11.9 4258.3 12.2EU Countries 10318.7 30.6 10879.0 31.2France 3674.7 10.9 3741.4 10.7Germany 3350.1 9.9 3854.9 11.0UK 961.0 2.9 942.6 2.7Spain 680.1 2.0 645.9 1.9Italy 762.8 2.3 718.9 2.1Austria 384.1 1.1 403.4 1.2Denmark 247.6 0.7 285.7 0.8The Netherlands 102.3 0.3 112.8 0.3Belgium 87.3 0.3 87.9 0.3Sweden 36.9 0.1 42.0 0.1Others 31.8 0.1 43.5 0.1Arab Countries 1607.3 4.7 1626.5 4.6Kuwait 779.9 2.3 854.1 2.3Saudi Arabia 307.7 0.9 307.6 0.9UAE 192.1 0.6 162.4 0.5Libya 71.9 0.2 55.4 0.2Jordan 41.2 0.1 32.8 0.1Yemen 49.7 0.1 55.8 0.2Sudan 25.5 0.1 24.7 0.1Others 139.3 0.2 133.7 0.3International and Regional Organizations 9977.5 29.6 10808.6 30.9IDA 1342.5 4.0 1369.5 3.9Arab Fund for Economicand Social Development 1234.3 3.7 1325.4 3.8European Investment Bank 1984.9 5.9 2032.6 5.8World Bank 2529.3 7.5 2620.4 7.5AMF 73.4 0.2 29.8 0.1African DevelopmentFund and Bank 1366.2 4.1 1537.0 4.4Islamic Development Bank (Jeddah) 63.6 0.2 106.4 0.3Other Organizations 1383.3 0.6 1787.5 5.1Egyptian Bonds and Notes 3079.5 9.2 2821.0 8.1Other Countries 1274.9 3.8 1379.8 4.0
34Central Bank of Egypt – Annual Report 2010/2011 - New Commitments on Loans and Facilities The year witnessed new commitments on loans and facilities for US$ 1.7billion, mostly from international and regional organizations (US$ 1.6 billion or 93.9percent of the total commitments). The remaining 6.1 percent constituted com-mitments on bilateral loans. Thus, total commitments declined by US$ 1.4 billionbelow the level of the previous FY, due to the noticeable fall in loan commitmentswith the World Bank and Japan. - Main Indicators of External Debt In the FY ending June 2011, the key indicators of external debt showed a dropin the debt/GDP ratio to 15.2 percent, from 15.9 percent, whereas external debt percapita rose to US$ 413.6 (from US$ 399.2 at end of June 2010). The ratio ofgovernment debt/total debt decreased to 77.6 percent, from 77.9 percent at end ofJune 2010. External Debt Indicators (US$) % End of June 300.0 460.0 275.0 450.0 250.0 450.0 225.0 440.0 200.0 413.6 430.0 175.0 420.0 150.0 125.0 410.0 100.0 65.2 400.0 75.0 77.9 390.0 50.0 25.0 20.1 15.2 380.0 0.0 370.0 2007/08 2008/09 2009/10 2010/11 Government External Debt / Total External Debt External Debt /GDP External Debt per capita (US$) (right axis) Notwithstanding the 7.1 percent rise in current receipts (export proceeds ofgoods and services and net transfers), the ratio of debt service stood at 4.5 percent inthe reporting and comparison periods. The 6.7 percent drop in short-term debt drovedown its ratio to total debt (from 8.8 percent a year earlier) to 7.9 percent.Nonetheless, its ratio to net international reserves climbed from 8.4 percent to 10.4percent, because of a sharper decline in international reserves compared to short-termdebt.
35 Central Bank of Egypt – Annual Report 2010/2011 External Debt Indicators % 12.0 FY 10.4 10.0 8.0 7.3 7.9 7.4 6.0 5.7 4.6 4.5 4.0 3.9 2.0 0.0 2007/08 2008/09 2009/10 2010/11 Debt Serv ice / Current Receipts (including transf ers) Short-term Debt / Net International Reserv es Short-term Debt / Total External Debt Debt Serv ice / Exports of Goods and Serv ices The following table highlights the indicators of external debt in Egypt, relativeto other groups of economic regions. The IMF’s classification revealed that Egypt’sexternal debt indicators lay within safety limits. The debt as a percentage of GDP(15.2 percent) indicator comes among the best global levels, that ranged between 15.3percent for the developing Asian economies and 66.0 percent for North and CentralEuropean countries. Moreover, the indicator of debt service/exports of goods andservices recorded 5.7 percent, i.e. less than the global levels forecast for 2011, thatranged between 11.0 percent for sub-Saharan Africa and 55.8 percent for North andCentral Europe, according to the IMF’s World Economic Outlook. Main Debt Indicators in Egypt Vs. Economic Regions External Debt/ External Debt/ Debt Service/Region GDP Exports of Goods Exports of Goods & Services & Services 2010 2011 2010 2011 2010 2011North & Central Europe 65.5 66.0 179.2 164.2 59.7 55.8Asia 15.3 15.3 48.8 47.5 18.5 20.0Latin America & the Caribbean 21.2 20.1 102.5 93.1 31.2 29.2Sub-Saharan Africa 22.8 21.5 65.5 57.6 15.8 11.0Middle East & North Africa 31.9 27.1 65.9 52.4 17.2 15.3Egypt* 15.9 15.2 71.0 71.4 5.5 5.7Source: IMF’s World Economic Outlook - Sept. 2011 (Statistical Appendix).* According to BOP data- Central Bank of Egypt.
36Central Bank of Egypt – Annual Report 2010/20111/9- Human Resources Development (HRD) In the reporting year, the Central Bank of Egypt (CBE) has been keen to makeheadway with the development of the human resources in the banking system byqualifying a new generation of banking cadres for managing this vital sector. In thisrespect, the CBE relies on the Egyptian Banking Institute to design and implement anumber of specialized programs in all banking fields to keep pace with the latestinternational banking developments.1/9/1- Activity of the Egyptian Banking Institute (EBI) In pursuit of developing and upgrading the efficiency of the banking staff, theEBI has been making progress with its training plan in the reporting year. The chartbelow illustrates the number of participants in these programs and the hours oftraining in the reporting year, as compared with the previous year. According to thetraining plan of the EBI, which comprised annual and special contractual programs,greater attention was given to special certificates, particularly as related to thequalification of senior and junior banking managers. A Comparison of the Overall Training Activity 26000 25244 25000 24279 24089 24000 23000 22000 21283 21000 20000 Participants Hours 2009/2010 2010/2011 It is noted that the total number of participants went down during the reportingyear, influenced by the dramatic events of January 25th Revolution, which led to thedisruption of training activity at the Institute in the first three months of 2011, but itreturned back to normal in May and June. The following charts indicate the number of participants and the training hoursduring FY 2010/2011.
37 Central Bank of Egypt – Annual Report 2010/2011 The Relative Distribution of the No. of Training The Relative Distribution of Participants in Hours in Training Programs Tranining Programs Seminars and Evaluation Training Conference and Exams Training Plan Evaluation Plan 1% 4% 20% and Exams 15% 16% Specialized Seminars Certificates and 18% Private and Conference 8% Private and Contractual Specialized Contractual programs Certificates Programs 57% 7% 54% In the reporting year, the Institute, in collaboration with national andinternational experts, arranged for a number of symposiums, conferences, workshops,and seminars (for bank staff, academics and researchers). In this context, 23symposiums were organized, attended by 1293 trainees. Moreover, the EBI activatedand developed its partnership with international institutions, inter alia “Agence deTransfert de Technologie Financière (ATTF)”, Luxembourg, in the area ofleadership, anti-money laundering and financial markets; “Global Talent IntelligenceStrategies (GTIS)” in the area of credit; “ToneStar Consulting” in the area of risks,and “MIS Training Institute” in internal auditing. Around 36 programs andinternational scholarships were offered for 573 trainees during the year. In addition, anumber of programs were introduced, in collaboration with some internationalinstitutions, including the “Global Association of Risk Professionals (GARP)”,“Institute of Internal Auditors (IIA)”, and the “Islamic Research and TrainingInstitute (IRTI)” of Saudi Arabia. It is inescapable to say that the EBI has beenworking in the past years to maximize cooperation with these institutions. The EBI also participated in the OECDs International Network on FinancialEducation (INFE), to undertake collective activities related to financial education.The institute issued the first information bulletin entitled “the Difference betweenFinancial Education and Financial Availability”, and is about to release othersuccessive periodicals for distribution among miscellaneous symposiums, con-ferences and training programs. Furthermore, to keep up with the advancedtechnology in the area of information technology, the EBI has been accredited by the“EC-Council”, an international institution specialized in IT systems security. Within the framework of the World Banks plan to develop the banking systemin Iraq, the EBI implemented an inclusive program in the field of bank supervision,offered a certificate in human resources, and introduced accounting, auditing and riskmanagement programs (attended by 52 participants in FY 2010/2011). Consideringthe progress made on this front, the World Bank decided to repeat these programs inthe forthcoming period.
38Central Bank of Egypt – Annual Report 2010/2011 To encourage junior bankers to make studies and researches, the EBIannounced in June 2011 a research competition, sponsored by the CBE, on three keybanking topics, specifically “the role of the Egyptian banking sector during theeconomic turmoil on the short-run”; “the pricing mechanism of the banking productsand its effects on the banks profitability”, and “the role of social corporateresponsibility in the banking sector after the 25 of January Revolution”. Furthermore,the EBI introduced two studies, entitled “potentials and obstacles” and “thesuccessful Malaysian experience in the development of SMEs”, with a focus on themain lessons to be learned and how to apply them to Egypt. Under the “Training for Employment” program, the Institute trained 918 freshgraduates from the Egyptian universities, to narrow the gap between academiceducation and labor market needs. Furthermore, a protocol was signed for thepurpose of cooperation between the Institute and the Social Fund for Development(SFD), to help the SFD benefit from these training programs, on the one hand, andacquaint the banking staff with the finance programs of SFD, on the other. Inaddition, the protocol aims also to qualify SME entrepreneurs to deal with thebanking system, as they need banking finance, especially in the field of agricultureprojects and franchise. The number of participants in the CBE staff training plan reached 2036trainees, involving 1502 participants in local programs (specialized andadministrative, as well as language and computer courses), 416 trainees in qualifyingprograms, and 113 participants in external programs. Also, five employees at thebank completed their post-graduate studies. Participants from the CBE in Training and Qualifying Programs No. 4000 3511 3500 3000 2500 2000 1502 1500 1024 1000 416 500 123 113 25 5 0 Qualifying programs External programs Post-graduate programs Local programs 2009/2010 2010/2011
39 Central Bank of Egypt – Annual Report 2010/2011 In FY 2010/2011, the Banking Institute offered a diversed range of trainingprograms for 1944 trainees of the CBE employees. This is in addition to the programsdesigned for the Banking Supervision Sector (attended by 255 participants), tacklingissues of particular importance (e.g. banking credit; rules of preparing financialstatements of banks; principles of recognition and measurement; and detection offorgery and falsification of documents). Within the framework of “MENA FinancialRegulators Training Initiatives”, a program was provided in cooperation with USFederal Reserve, entitled “Bank Analysis and Examination School”, involving 18 ofthe staff of the CBE and some Arab central banks. The initiative also includedmanager promotion programs (129 participants), and others for supervisordevelopment (93 participants), along with various financial and administrativeprograms.
Chapter 2: Banking Developments 2/1- Financial Position 2/2- Deposits 2/3- Lending Activity 2/4- Cash Flows at Banks 2/5- Bank Performance Indicators
41 Central Bank of Egypt – Annual Report 2010/2011 Chapter 2 Banking Developments2/1- Financial Position The aggregate financial position of registered banks in Egypt (39) posted LE1269.7 billion at end of June 2011, up by LE 49.0 billion or 4.0 percent in the FY2010/2011 (against LE 128.7 billion and 11.8 percent in the previous FY). Theincrease came about despite the fall of LE 13.2 billion in their financial position inthe second half of the year. Such a fall is explained by the LE 101.1 billion decline inbalances at banks (including the CBE), brought about by the decrease of LE 103.4billion in banks obligations to the CBE, following the withdrawal of a portion ofCBE deposits with these banks. The CBE used these deposits to make up forforeigners’ liquidation of a sizeable portion of their investments, on the back of theRevolution. However, the fall was somehow eased by the increases in securities andinvestments (LE 33.0 billion), balances with banks abroad (LE 28.9 billion), andlending and discount balances (LE 16.1 billion). The increase on the liabilities side is mainly ascribed to the growth of depositsby LE 64.5 billion or 7.2 percent, posting LE 957.0 billion (75.4 percent of theaggregate position of banks at end of June 2011). Other affecting factors includedbanks’ augmentation of their equity by LE 6.0 billion or 8.0 percent, and the pickupin bonds and long-term loans by LE 4.5 billion. However, the rise was offset by thedecline of obligations to local banks (including the CBE) by LE 25.7 billion or 47.7percent; the drop in provisions by LE 15.3 billion or 21.7 percent; and in obligationsto banks abroad by LE 5.1 billion. Banking Liabilities & Relative Importance of their Components at End of June LE bn 100% 1500 80% 1200 60% 900 40% 600 20% 300 0% 0 2007 2008 2009 2010 2011 Equities P rovisions Bonds & Long-term Loans Obligations to Local Banks Obligations to Banks Abroad Total Deposits Other Liabilities Total Liabilities (Right Scale)
42Central Bank of Egypt – Annual Report 2010/2011 Changes in Liabilities (LE mn) Change in FY 2009/2010 2010/2011 Value % Value %Capital 5047 12.1 12451 26.7Reserves 7115 33.3 (6430) (22.6)Provisions 670 1.0 (15312) (21.7)Bonds and long-term loans (348) (1.6) 4483 20.7Obligations to CBE 25924 314.0 (24442) (71.5)Obligations to local banks (3046) (13.4) (1268) (6.4)Obligations to banks abroad 2110 11.6 (5137) (25.3)Total deposits 82798 10.2 64545 7.2Other liabilities, of which: 8392 10.7 20145 23.2 Payable cheques 1188 33.2 379 8.0Total liabilities 128662 11.8 49035 4.0 The pickup on the assets side was mainly due to the hike in banks investmentsin securities and TBs by LE 68.3 billion or 16.8 percent, to post LE 474.2 billion(37.3 percent of banks’ aggregate position) at end of June 2011. Balances with banksabroad also increased by LE 38.7 billion worth, or 67.5 percent, and so did lendingand discount balances (up by LE 8.1 billion or 1.7 percent), reaching LE 474.1billion. Meanwhile, balances with local banks declined by LE 83.7 billion or 41.7percent. Banking Assets & Relative Importance of their Components LE bn at End of June 100% 1500 80% 1200 60% 900 40% 600 20% 300 0% 0 2007 2008 2009 2010 2011 Cash Securities & Investments in TBs Balances with Local Banks Balances with Banks Abroad Lending & Discount Balances Other Assets Total Assets (Right Scale)
43 Central Bank of Egypt – Annual Report 2010/2011 Change in Assets (LE mn) Change in FY 2009/2010 2010/2011 Value % Value %Cash 1321 11.9 2382 19.1Securities and investments 73298 22.0 68281 16.8Balances with the CBE 30922 20.6 (83039) (45.9)Balances with local banks, of which: (3686) (15.8) (670) (3.4) Lending and discount (46) (5.9) 156 21.4Balances with banks abroad, of which: (19749) (25.6) 38709 67.5 Lending and discount 135 7.2 (606) (30.2)Lending and discount balances (market rates) 36033 8.4 8149 1.7Other assets 10523 15.5 15223 19.5Total assets 128662 11.8 49035 4.0 The increase in banks investments in securities and bills during the year wasmainly due to the rise in banks investments in treasury bills by LE 74.0 billion and ingovernment bonds by LE 22.9 billion. However, the rise was held back by thecontraction in banks investments in foreign securities by LE 24.2 billion and in non-government bonds by LE 4.1 billion. % Relative Structure of Banks Portfolio Investment 70 June 2010 60 52.4 June 2011 50 43.0 40 33.8 33.7 30 20 11.3 8.2 6.9 10 3.7 4.6 2.3 0 T reasury Bills Gov. Bonds Non-gov. Bonds Corp. Equities Foreign Securities Net transactions of local banks with correspondents abroad revealed a rise intheir net credit balances abroad by the equivalent of LE 43.8 billion, driving up theirnet transactions with banks to LE 80.9 billion worth at end of June 2011 (against LE37.1 billion at end of June 2010). The rise resulted from the increase in their balanceswith banks abroad by the equivalent of LE 38.7 billion, and the decline in theirobligations thereto by LE 5.1 billion.
44Central Bank of Egypt – Annual Report 2010/20112/2- Deposits In FY 2010/2011, banks deposits (including government deposits) went up byLE 64.5 billion or 7.2 percent (against LE 82.8 billion or 10.2 percent in the previousFY), ending the year at LE 957.0 billion or 75.4 percent of the aggregate financialposition. A considerable part of the increase in deposits (60.2 percent) emanated fromthe rise in local currency deposits by LE 38.8 billion or 5.7 percent, to register LE724.9 billion at end of June 2011. Likewise, deposits in foreign currencies increasedby the equivalent of LE 25.7 billion or 12.5 percent. Deposits at Banks by Sector (LE bn)End of June Local Currency Foreign Currencies 2009 2010 2011 2009 2010 2011Total 598.6 686.1 724.9 211.1 206.4 232.1Government sector 49.6 58.5 56.7 41.5 45.6 51.4Public business sector 28.8 32.7 29.3 8.7 6.5 7.6Private business sector 104.3 114.4 104.0 58.3 54.9 60.2Household sector 413.5 477.9 532.0 100.2 96.9 109.2External sector 2.4 2.6 2.9 2.4 2.5 3.7 The household sector was the major contributor to the rise of local currencydeposits. Its deposits scaled up by LE 54.2 billion or 11.3 percent, registering LE532.0 billion or 73.4 percent of total deposits at end of June 2011. In contrast, thedeposits of the private business sector decreased by LE 10.4 billion, public businesssector by LE 3.4 billion and government sector by LE 1.8 billion. As for foreigncurrency deposits, the household sector was again the key depositor, contributingapproximately half of their increase. Its deposits, expressed in Egyptian pound, grewby LE 12.3 billion, to register LE 109.2 billion or 47.1 percent of total foreigncurrency deposits at end of June 2011. Meanwhile, a pickup was noticed in theforeign currency deposits of the government sector (up by LE 5.8 billion to LE 51.4billion). Those of the private business sector also rose by LE 5.3 billion worth, andso did the external sector by LE 1.2 billion and the public business sector by LE 1.1billion.
45 Central Bank of Egypt – Annual Report 2010/2011 % Rate of Change in Deposits by Sector 50 Local Currency Foreign Currencies 40 30 20 10 0 (10) (20) 2009/2010 2010/2011 2009/2010 2010/2011 (30) Government Sector Public Business Sector Private Business Sector Household Sector External Sector2/3- Lending Activity Banks lending and discount balances mounted by LE 8.1 billion or 1.7 percent(against LE 36.0 billion and 8.4 percent), amounting to LE 474.1 billion, thusrepresenting 37.3 percent of total assets and 49.5 percent of total deposits at end ofJune 2011. Change in Bank Loans by Sector in FY 2010/2011 (LE mn)End of June Local Currency Foreign CurrenciesTotal 14110 (5961)Government sector 2802 (2384)Public business sector 3509 (634)Private business sector 2116 (4509)Household sector 5846 569External sector (163) 997 The pickup in the lending and discount balances was an outcome of the rise inlocal currency loans by LE 14.1 billion or 4.5 percent, to score LE 327.8 billion atend of June 2011, and the decline in lending and discount balances in foreigncurrencies by LE 6.0 billion worth or 3.9 percent, posting LE 146.4 billion. Around41.4 percent of the increase in local currency loans was extended to the householdsector (up by LE 5.8 billion or 6.5 percent, against LE 11.4 billion and 14.5 percent).Moreover, loans received by the public business sector moved up by LE 3.5 billion,the government sector by LE 2.8 billion and the private business sector by LE 2.1billion. In contrast, loans to the external sector decreased by LE 0.1 billion. As forloan and discount balances in foreign currencies, the decline primarily reflected thefall in the share of private business sector by LE 4.5 billion worth or 4.4 percent andto the government sector by LE 2.4 billion or 10.0 percent.
46Central Bank of Egypt – Annual Report 2010/2011 The relative distribution of loans by economic activity indicated that themanufacturing sector was the major recipient of loans in local and foreign currencies,with a relative share of 36.1 percent at end of June 2011. The services sector camenext with 27.2 percent, followed by the unclassified sectors including the householdsector (24.7 percent), trade (10.1 percent), and agriculture (1.9 percent). Credit Facilities by Economic Activity LE bn at End of June 2011 200 180 160 140 120 100 80 60 40 20 0 Agriculture Manufacturing Trade Services Unclassified Local Currency Foreign Currencies At the end of June 2011, loans and advances by maturity (excluding discounts)registered LE 471.3 billion, with a rise of LE 7.4 billion or 1.6 percent during thereporting year. The increase reflects the rise in long-term loans (more than one year)by LE 23.1 billion or 10.0 percent, and the decline in short-term loans (a year or less)by LE 15.7 billion or 6.8 percent. The rise in long-term loans was driven by thegrowth of loans in local currency by LE 17.6 billion and foreign currencies by theequivalent of LE 5.5 billion. In the meantime, the retreat of short-term loans isascribed to the fall of loans both in foreign and local currencies (by LE 11.7 billionworth and LE 4.0 billion, in order).
47 Central Bank of Egypt – Annual Report 2010/20112/4- Cash Flows at Banks The statement of banks cash flows showed a surplus of LE 19.6 billion in localtransactions, as banks’ resources reached LE 178.9 billion and their uses LE 159.3billion. That surplus stood in contrast to an equivalent deficit in banks externaltransactions. It is worthy to note that banks sources of funds come from the decreasein assets or the increase in obligations of banks, given that funds are used for thereduction of obligations or the increase of assets. Regarding local transactions, the resources generated from the decrease inassets (LE 83.7 billion), were the result of the decrease in the balances at the CBE byLE 83.0 billion in FY 2010/2011. The decline was more conspicuous in the secondhalf of the FY, because of the retreat in banks deposits at the CBE (the Bank used toutilize these deposits to absorb excess liquidity) as a consequence of the change inliquidity conditions of banks in the post-revolution era. Moreover, balances with localbanks decreased by LE 0.7 billion. The resources emanating from the rise inobligations (LE 95.2 billion), came largely from the increase of LE 64.5 billion indeposits with banks (60.2 percent of which was in local currency). Interestingly, thepickup of LE 66.6 billion in household deposits outpaced the total increase indeposits. The local uses brought about by the increase in assets reflected the increases inportfolio investments by LE 92.5 billion (mostly bills and government bonds), otherassets by LE 15.2 billion, lending and discount balances by LE 8.2 billion, and cashby LE 2.4 billion. As for the uses resulting from the reduction in obligations, banks’obligations to the CBE dropped by LE 24.4 billion (because of the CBEs withdrawalof its foreign currency deposits at banks to make up for the market exit by someforeigners, in the wake of 25 January Revolution). Moreover, provisions at banksshrank by LE 15.3 billion (due to the settlement of part of non-performing loans ofsome public sector banks, by debiting from the counterpart accounts of provisions).Obligations to banks in Egypt also fell by LE 1.3 billion.
48Central Bank of Egypt – Annual Report 2010/2011 Banks Cash Flows Statement* Local Transactions (LE mn) 2009/2010 2010/20111. Total Resources: 133633 178902 A. From the Increase in Obligations (Liabilities) 129947 95194 Deposits 82798 64545 Obligations to the CBE 25924 Capital accounts (equities) 12163 6021 Provisions 670 Other obligations 8392 20145 Loans and bonds 4483 B. From the Decrease in Assets 3686 83708 Balances with the CBE - 83039 Balances with local banks 3686 6692. Total Uses: 125393 159271 A. To Reduce Obligations 3394 41022 Obligations to the CBE 24442 Obligations to local banks 3046 1268 Loans and bonds 348 Provisions 15312 B. To Increase Assets 121999 118249 Cash 1321 2382 Balances with the CBE 30923 Portfolio investment 43199 92496 Lending and discount 36033 8149 Other assets 10523 15222Sources/Uses Surplus (+) or Deficit (-) 8240 19631* Figures in this statement represent only the difference between the balances at end of the reporting year and of the preceding year. As for banks external transactions, their resources emanated from the declinein their portfolio investments by LE 24.2 billion worth. The uses with the externalworld exceeded resources, as balances with banks abroad rose by LE 38.7 billionworth, and obligations of local banks to banks abroad decreased by LE 5.1 billionworth. Banks Cash Flows Statement* External Transactions (LE mn) 2009/2010 2010/20111. Total Resources: 21859 24215 A. From the Increase in Obligations 2110 Obligations to banks abroad 2110 B. From the Decrease in Assets 19749 24215 Portfolio investments 24215 Balances with banks abroad 197492. Total Uses: 30099 43846 A. To Reduce Obligations 5137 Obligations to banks abroad 5137 B. To Increase Assets 30099 38709 Portfolio investments 30099 Balances with banks abroad 38709Sources/Uses Surplus (+) or Deficit (-) -8240 -19631* Figures in this statement represent only the difference between the balances at end of the reporting year and the preceding year.
49 Central Bank of Egypt – Annual Report 2010/20112/5- Bank Performance Indicators The following are the results realized by banks in each area according to theirfinancial positions at end of June 2011:First: Capital Adequacy Standard By virtue of this standard, banks registered at the CBE (32 banks, excludingbranches of foreign banks) are obliged to maintain a specific ratio (a minimum of 10percent) of the capital (core and supplementary) to risk-weighted assets andcontingent liabilities. Assets and contingent liabilities are calculated on risk-weights ranging between0 and 100 percent (or above 100 percent for real estate development companiesoperating in the construction of for-sale housing units if the project’s leverageexceeds 2 : 1, and for the banking finance granted for total or partial acquisition ofcompanies). Meeting that standard reflects a banks ability to face any potential risks.A follow-up on banks’ compliance came up with the following findings: • For banks combined, the ratio reached 16.0 percent (against a minimum established ratio of 10.0 percent). That ratio reflected core capital of 13.3 percent and supplementary capital of 2.7 percent. • Banks, on a case by case basis, abided by the capital adequacy ratio (a minimum of 10.0 percent). Moreover, the capital adequacy ratio ranged between 10-15 percent in 10 banks, and exceeded 15 percent in 22 banks. Capital Ade quacy Standard More than 20% 12 banks From 10% to 15% 10 banks 38% 31% 31% From 15% to 20% 10 banks
50Central Bank of Egypt – Annual Report 2010/2011Second: Asset Quality On 24 May 2005, the CBE issued regulations pertaining to customer creditrating and provisioning. These regulations comprise lending to corporates, taking intoaccount the obligor risk rate (ORR), consumer loans, real estate loans for personalhousing, and loans to small-size economic enterprises. The following chart shows the beneficiary entities of credit facilities: Banks Contingent Liabilities and Loans Loans to sm all- size econom ic Consum er loans enterprises & real estate 3.5% loans for personal housing 11.2% Lending to corporates 85.3%Third: Profitability This indicator shows the level of profitability realized by a bank, its ability tosupport shareholders equity, and distribute dividends among its shareholders. Afollow-up on the levels of banks profitability revealed the following findings:A- Banks for Which the FY Ends June 30 (Public Sector Banks and the Export Development Bank of Egypt) Net profits (mostly of the National Bank of Egypt) amounted to LE 1611million for the FY ending June 30, 2010. The respective ratios of banks net profits toaverage equities, and to average assets, stood at 8.0 percent and 0.3 percent,respectively.
51 Central Bank of Egypt – Annual Report 2010/2011 Net Profits of Commercial Banks Whose FY Ends June LE mn 1800 1611 1600 1400 1200 1000 800 600 400 266 200 0 2009 2010B- Banks for Which the FY Ends December 31 Banks net profits for the FY ending December 31, 2010 registered LE 9062million. The ratio of banks net profits to average equities posted 16.2 percent, and toaverage assets 1.4 percent. Net Profits of Commercial Banks Whose FY Ends December LE mn 10000 9062 9000 8000 7640 7000 6000 5000 4000 3000 2000 1000 0 2009 2010 The main financial indicators of banks financial positions at end of June 2011are shown in the following table.
52Central Bank of Egypt – Annual Report 2010/2011 Statement June 2011Average reserve ratio (the period ending June 27, 2011)against a minimum of 14 % 14%Average liquidity ratio (minimum) Domestic 20% 55.3% Foreign 25% 51.1%Liquid assets/customers deposits 69.9%Assets in foreign currencies/liabilities and equities in foreign currencies 102.6%Loans to customers/customers deposits 49.5%Claims on banks in Egypt/ banks’ claims in Egypt 102.8%Claims on banks abroad/ banks’ claims abroad 633.5%Claims on banks abroad/ banks’ claims abroad& customers’ deposits in foreign currencies 38.8%Contingent liabilities/total assets 16.5%
Chapter 3: Macroeconomic Developments 3/1- Gross Domestic Product (GDP) 3/2- Inflation 3/3- Consolidated Fiscal Operations of the General Government 3/4- Balance of Payments and External Trade 3/5- Non-Banking Financial Services Sector
53 Central Bank of Egypt – Annual Report 2010/2011 Chapter 3 Macroeconomic Developments 3/1- Gross Domestic Product (GDP) According to the data of the Ministry of Planning, real GDP growth at factorcost noticeably declined to 1.9 percent in FY 2010/2011 from 5.1 percent in FY2009/2010. The decline was largely a natural result of the weak performance of alleconomic sectors in general, in the wake of the events of the January 25th Revolution.This caused a negative growth of 3.8 percent at factor cost, and 4.2 percent atconstant and market prices (y/y) in Q3 (January/March 2011). However, in Q4(April/June), the economy managed to make up for part of its losses. In figures, theGDP growth mounted to a positive 0.3 percent at factor cost, and 0.4 percent atconstant and market prices (annual basis). On the supply side, the domestic demand-driven sectors made a lowercontribution of 89.5 percent to GDP growth (against 90.2 percent in the previousFY). The underperformance was clearly seen in manufacturing (adding -0.1 point toGDP growth against 0.8 point), construction and building (0.2 point against 0.7point), wholesale and retail trade (0.2 point against 0.6 point), and finance (nil against0.3 point) and was less pronounced in agriculture and irrigation (0.4 point against 0.5point), communications & IT (0.3 point against 0.5 point) and the generalgovernment (0.3 point against 0.4 point).
54Central Bank of Egypt – Annual Report 2010/2011 GDP Growth by Main Economic Sectors at Factor Cost and Constant Prices (percentage point) Domestic Demand-Driven Sectors 2010/2011 2009/2010 Share in Real Share in RealSector Growth Rate GDP Growth Growth Rate GDP Growth (%) (1.9 percent) (%) (5.1 percent)Agriculture,irrigation and fishing 2.7 0.4 3.5 0.5Manufacturing -0.9 -0.1 5.1 0.8Electricity 4.5 0.1 6.3 0.1Construction andbuilding 3.7 0.2 13.2 0.7Transportation andstorage 2.0 0.1 6.8 0.3Communications 6.7 0.3 13.3 0.5Wholesale trade 1.6 0.2 6.1 0.6Finance 1.6 0.0 5.2 0.3General government 3.7 0.3 4.2 0.4Other sectors 0.2 0.4Total 1.7 4.6 External Demand-Driven Sectors 2010/2011 2009/2010 Growth Rate Share in Real Growth Rate Share in RealSector (%) GDP Growth (%) GDP Growth (1.9 percent) (5.1 percent)Extractions 0.6 0.1 0.9 0.1Suez Canal 11.5 0.3 -2.9 -0.1Tourism -5.9 -0.2 12.0 0.5Total 0.2 0.5 External demand-related sectors also underperformed; particularly tourismwhose contribution to GDP growth fell from 0.5 point in the previous FY to anegative 0.2 point in the reporting year. However, the effect of such a fall wasmitigated by the higher contribution of Suez Canal (0.3 point against a negative 0.1point). The contribution of extractions remained stable at 0.1 point. Notably, the improvement in the GDP growth in Q4 (April/June 2011)reaching 0.3 percent relative to the -3.8 percent in Q3 is explained by the reversalfrom negative to positive contributions of wholesale and retail trade, transportationand storage, finance, public services and construction and building. Moreover, thenegative contribution of manufacturing inched down from 1.8 percentage point toonly 0.7 point, and that of tourism from -1.4 point to -0.8 point.
55 Central Bank of Egypt – Annual Report 2010/2011 Grow th Rates during Q3 and Q4 of FY 2010/2011 (Annual Basis) % 20 15 12.7 10 3.4 2.3 3.3 2.9 2.8 3.2 5 2.5 2.3 2.2 2.2 0.3 2.1 1.7 1.6 2.1 0 -5 -0.6 -3.8 -10 -15 -20 -19.5 -25 -30 -35 Tourism Electricity Transportation & Storage Wholesale & Retail Trade Social Solidarity Agriculture, Forests & Fishing Information Water Suez Canal Construction & Buildings Extractions Communications Finance Real Estate Public Government Manufacturing Sewerage social services Insurance Q4 (0.3%) Q 3 (-3.8%) Public and private sectors added 1.9 percent to economic growth. Thecontribution of the former remained broadly at the same level of 2009/2010 (1.1point), while the latter added only 0.8 point (against 4.0 points). The decline in theshare of the private sector mainly took place in the third quarter (-4.4 points - annualbasis) and was most pronounced in manufacturing, tourism, wholesale and retailtrade, construction and building, transportation, storage and IT, and finance. Contribution of The Private Sector to Real GDP Grow th (at Factor Cost) Education, health & other services 0.10 Real Estate 0.10 -0.30 Tourism Finance 0.00 0.16 Wholesale & Retail Trade Com m unications 0.20 0.05 Transportation & storage Construction & building -0.14 0.17 Manufacturing Extractions 0.05 0.36 Agriculture, Forests & Fishing -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 Fiscal Year 2010/2011 (0.8 percetange point) Fiscal Year 2009/2010 (4.0 percetange point)
56Central Bank of Egypt – Annual Report 2010/2011 Contribution of The Public Sector to Real GDP Grow th (at Factor Cost) General Governm ent 0.32 0.15 Social solidarity Insurance 0.01 0.04 Finance Wholesale & Retail Trade 0.01 0.35 Suez Canal Com m unications 0.07 Transportation & storage 0.03 Construction & building 0.02 Water 0.02 Electricity 0.08 Manufacturing -0.01 Extractions 0.03 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 Fiscal Year 2010/2011 (1.1 percetange point) Fiscal Year 2009/2010 (1.1 percetange point) On the demand side, the slowdown in economic growth was primarily ascribedto the lower share of capital formation (including the change in stock) that registereda negative 0.8 point (against a positive 1.6 point). Another factor at work was thedecline in the share of net external demand (exports of goods and services lessimports of goods and services) that shifted from a positive 0.1 point to a negative 1.0point. However, the rise in the share of private consumption (3.2 points against 2.9points) made up for the weak contributions of the above items. Share of Demand Components in Real GDP Growth Rate 5.0 Net Exports 4.0 3.4 3.6 Investm ent Consum ption 3.0 (Percentage 1.6 point) 2.0 1.0 0.1 0.0 -1.0 -0.8 -1.0 -2.0 2009/2010 2010/2011
57 Central Bank of Egypt – Annual Report 2010/2011 Growth Rates of Demand Components and Their Share in Real GDP Growth . Growth Rates Share in GDP Growth (%) (percentage point) 2009/10 2010/11 2009/10 2010/11 Real GDP Growth (1+2) 5.1 1.8 5.1 1.8 1-Domestic Demand (A+B) 4.9 2.7 5.0 2.8 A- Final Consumption 4.2 4.4 3.4 3.6 Private 4.1 4.5 2.9 3.2 Public 4.5 3.8 0.5 0.4 B- Capital Formation (Including Change in the Stock) 8.0 -4.4 1.6 -.0.8 2- Net External Demand -5.2 -43.2 0.1 -1.0 Implemented investments (at 2006/2007 prices) amounted to LE 162.9 billion,registering a decline of 5.6 percent in the reporting year compared with a 7.7 percentincrease a year earlier. The slowed investments were mainly attributed to the lowercontribution of the private sector (5.8 points against 16.5 points) especially of oil &gas, communications & IT, manufacturing, and real estates. In addition, the negativecontribution of the public sector aggravated (11.4 points against 8.8 points). Thedecline in investment growth was largely caused by the sectors of electricity;transportation & storage; and water & sanitation. However, contribution of naturalgas, communications and IT, real estate and manufacturing to investment growthincreased. Contribution of the Public Sector in the Real Growth of Investment Others * -5.80 Other Services -0.94 Drainage -0.50 Health Services -0.42 Educational Services -0.69 Real Estate 0.17 Tourism 0.00 Financial Intermediaries 0.09 Wholesale & Retail Trade 0.10 Suez Canal -0.03 Communications 0.84 Transportation & Storage -2.09 Construction & Building -0.06 Water -0.77 Electricity 0.12 Other Manufacturing -1.09 -0.02 Oil Refining Natural Gas -0.13 Crude Oil 0.01 Agriculture, Irrigation & Reclamation -0.15 -15 -14 -13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 Fiscal Year 2010/2011 (-11.4 percentage point) * Includes price differences & settlements Fiscal Year 2009/2010 (-8.8 percentage points)
58Central Bank of Egypt – Annual Report 2010/2011 Contribution of the Private Sector in the Real Growth of Investment Others* 8.23 Other Services -1.20 Drainage 0.00 Health Services 0.39 Educational Services 0.40 Real Estate 5.89 Tourism 0.65 Financial Intermediaries 0.00 Wholesale & Retail Trade 1.91 Suez Canal 0.00 Communications 0.14 Transportation & Storage -0.50 Construction & Building 0.64 Water 0.00 Electricity 0.00 Other Manufacturing 0.03 Oil Refining 0.28 Natural Gas -2.97 Crude Oil -7.91 Agriculture, Irrigation & Reclamation -0.20 -14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Fiscal Year 2010/2011 (5.8 percentage point) * Includes price differences & settlements Fiscal Year 2009/2010 (16.5percentage points) The breakdown of implemented investments by economic sector ran as follows:16.4 percent in extractions, 10.8 percent in manufacturing, 7.4 percent in electricity,3.0 percent in water, 2.7 percent in agriculture, 2.5 percent in construction andbuilding, 27.8 percent in productive sectors and 29.4 percent in social services.3/1/1-Employment and Unemployment According to the CAPMAS Labor Force Survey Report, all indicators wererelatively stable in Q4 2010/2011 (April/June), as compared with the precedingquarter (January/March 2011). The annual growth rate of the labor force posted 0.5percent at end of June 2011, compared with 0.6 percent at end of March.Unemployment rate registered 11.8 percent at end of June 2011(against 11.9 percentat end of March). The number of unemployed individuals accelerated by some 760thousand or 32.4 percent in the reporting year. The rise was attributable to theincrease in the number of unemployed males by 779 thousand, curbed by the declinein the number of jobless females by 19 thousand. Labor Force & Employmet Indicators 14.0% 11.90% 11.80% 12.0% 9.36% 9.40% 9.12% 8.96% 8.94% 8.90% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009/2010 2010/2011 Unem ploym ent Labor Force Em ploym ent
59 Central Bank of Egypt – Annual Report 2010/20113/2-InflationA - Consumer Price Index (CPI) During FY 2010/2011, the annual headline CPI inflation (urban) inched up, topost 11.8 percent in June 2011 (from 10.1 percent in June 2010). The rise in theprices of tobacco and narcotics (69.9 percent, against nil) was a main cause for theincrease in headline inflation, contributing 1.5 percentage point (against nil). Thedecision to raise taxes on tobacco (40-50 percent) effective as of the first of July 2010was behind the price hike in tobacco. The contribution of food and non-alcoholicbeverages rose as well to 7.8 percentage points (from 7.1 percentage points), with arelative weight of 39.9 percent of CPI. Similarly, the share of education upped to 1.1point, from 0.4 point. Annual CPI and The Price Index of Food and Non-Alcoholic Beverages (Urban) % 28 24 20 16 12 12.1 11.8 11.8 11.5 10.9 11.0 11.0 10.8 10.7 10.1 10.4 10.2 10.3 8 4 0 Jun-2010 Jul Aug Sep Oct Nov Dec Jan-2011 Feb Mar Apr May Jun-2011 All Item s Food and Non-Alcoholic BeveragesSource: CAPMAS. The larger share of food and non-alcoholic beverages in headline inflation isassociated with the 19.0 percent rise in their prices in the reporting year (from 18.6percent a year earlier), affected by world price hikes of food items (32.9 percent) inthe year ending June 2011. The intensification of the annual inflation of this groupwas held back by the noticeable moderation in world food prices in Q4.
60Central Bank of Egypt – Annual Report 2010/2011 Change in The International Prices of Basic Foodstuffs % 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009/2010 2010/2011 Source: IMF. The pickup in the share of food and non-alcoholic beverages was ascribed tothe higher contributions of most food items, especially bread and cereals (1.8percentage point against 0.3 point); oils and fats (0.6 point against 0.4 point);vegetables (2.3 points against 2.2 points); and fruits (0.6 point against 0.5 point).Conversely, declines were observed in the items of meat and poultry (1.4 pointagainst 2.3 points) and sugar (0.2 point against 0.3 point). Contribution of Main Item s of Food in Headline Inflation (Annually) Percentage point FY 2.7 2.4 2.1 2009/2010 1.8 2010/2011 1.5 1.2 0.9 0.6 0.3 0.0 Meat & Poultry Oils & Fats Fruits Bread & cereals Vegetables Sugar On the other hand, the share of miscellaneous goods and services decelerated(from 0.6 to 0.1 point), and so did housing, electricity and fuel (0.2 against 0.6 point),thus curbing the rise in inflation in the reporting year. Another factor that helpedreign in the rise of inflation was the slowdown in real GDP growth (1.9 percent atfactor cost).
61 Central Bank of Egypt – Annual Report 2010/2011 The following table illustrates the shares of CPI groups (urban) in headlineinflation during the periods of review and comparison:Main CPI Items Inflation in FY Share in Headline Inflation in FY (%) (Percentage Point) 2009/2010 2010/2011 2009/2010* 2010/2011General Index 10.1 11.8 10.1 11.8Food and non-alcoholic beverages 18.6 19.0 7.1 7.8Alcoholic beverages, tobacco and narcotics 0.0 69.9 0.0 1.5Clothing and footwear 0.6 2.2 0.0 0.1Housing, water, electricity, gas & fuel 2.9 1.1 0.6 0.2Furnishings, household equipment androutine maintenance 3.3 2.5 0.1 0.1Health care 0.3 1.9 0.0 0.1Transportation 1.0 1.0 0.1 0.1Communications -0.2 0.1 0.0 0.0Culture and recreation 2.9 5.9 0.1 0.2Education 9.4 24.3 0.4 1.1Restaurants and hotels 4.5 12.1 0.2 0.5Miscellaneous goods & services 16.4 2.4 0.6 0.1∗ The CAPMAS issued a new series of CPIs in August 2010; some of the data on the period of comparison is not available because of change in the weights of this series. CPI inflation (urban), on a monthly basis, accelerated to 0.9 percent on averagein the reporting year (against 0.7 percent in the year of comparison). The monthlyinflation recorded its highest level in July and August 2010 (2.5 percent and 2.9percent, respectively), on the back of the decision of raising taxes on tobacco, alongwith the price hikes of food and non-alcoholic beverages in these two months.Nevertheless, inflation started to recede since September 2010, recording a negativerate in November and December 2010 (the lowest level throughout the reportingperiod), showing almost the same level as the corresponding months a year earlier. Monthly Inflation Rate According to CPI (Urban) % 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 9 0 1 10 11 pr n y pr n y b b ug ug ct ct l l ov n- c ov n- c ep ep ar ar Ju Ju 00 01 01 Ju Ma Ju Ma Fe Fe Ja e Ja e O O A A 20 20 M M A N D A N D S S -2 -2 -2 n Ju
62Central Bank of Egypt – Annual Report 2010/2011B - Producer Price Index (PPI) Taking an upward trend similar to the CPI, the annual PPI inflation acceleratedto 19.4 percent (against 8.6 percent in the previous FY). % Annual Inflation Rate According to PPI (2004/2005 = 100) 25.0 20.0 15.0 10.0 5.0 0.0 -5.0 -10.0 -15.0 09 10 11 r r 10 11 b Ju May b Ju May ct ct g g l l v Ja ec v n- c p p ar ar Ju Ju Ap Ap Au No Au No Fe Fe Se Se De O O 20 20 20 20 20 M M D n- n- n- n- Ju Ja The rise in PPI inflation was ascribed above all to the higher contribution ofmining and quarrying (7.3 points against 2.0 points), in view of the significantincrease in its inflation rate (36.3 percent from 9.8 percent), particularly due to thehigher share of crude oil (11.2 points against 3.0 points). Also, the share ofagriculture and fishing inched up to 7.9 points from 3.7 points, mainly because of thelarger contribution of cereals and leguminous crops (1.7 point against 0.1 point),fruits (1.4 points against 0.4 point), rice (0.8 point against 0.1 point), and cotton (0.5point against a negative 0.1 point). The higher inflation was also brought about by the pickup in the contributionof the manufacturing group, adding 3.7 points against 2.5 points. This was attributedto the rise in the share of the subgroup of iron and steel industry (1.1 point against 0.8point), fats, and oils (0.3 point against nil). Add to this, the increased contribution offood and accommodation services (0.5 percentage point against a negative 0.1 point). The following table shows inflation rates and the shares of PPI groups inheadline inflation during the years of reporting and comparison:
63 Central Bank of Egypt – Annual Report 2010/2011 Share of PPI Groups in Headline Inflation (2004/2005=100) Inflation Share in Headline during the Period InflationMain PPI Groups (%) (Percentage Point) July/June July/June 2009/2010 2010/2011 2009/2010 2010/2011General Index 8.6 19.4 8.6 19.41-Agriculture, Forestry and Fishing, 11.6 23.9 3.7 7.9of which: Cereals and leguminous crops 1.3 44.6 0.1 1.7 Rice 13.8 75.0 0.1 0.8 Vegetables 37.5 30.1 2.0 2.1 Fruits 6.3 21.4 0.4 1.4 Cotton -11.2 87.4 -0.1 0.5 Poultry and eggs 23.3 1.6 0.8 0.1 Fish -5.0 2.0 -0.1 0.02-Mining & Quarrying, of which: 9.8 36.3 2.0 7.3 Crude oil 13.5 48.2 3.0 11.2 Sand and stone 13.8 8.9 0.0 0.03-Manufacturing, of which: 6.9 10.3 2.5 3.7 Processed food products, 11.8 12.8 1.0 1.1 of which: Oils and fats 0.5 21.1 0.0 0.3 Dairy products 3.6 8.9 0.0 0.1 Fertilizers 29.9 7.4 0.3 0.1 Wood & products -13.4 35.4 0.0 0.0 Cement 2.0 1.4 0.0 0.0 Iron and steel 19.2 24.2 0.8 1.14-Electricity and Gas, of which: 22.0 0.0 0.4 0.0 Electric power generation, transmission and distribution 29.4 0.0 0.4 0.05-Water Supply Activities 5.6 0.0 0.1 0.06-Transportation and Storage, 0.5 2.0 0.0 0.0 of which: Land transport 3.5 0.0 0.0 0.07- Food and Accommodation Services, -3.5 13.1 -0.1 0.5 of which: Meal serving services in limited service facilities 5.7 17.0 0.0 0.18-Information and Communications 0.0 0.0 0.0 0.0Source: CAPMAS.
64Central Bank of Egypt – Annual Report 2010/20113/3- Consolidated Fiscal Operations of the General Government Affected by the events and associated repercussions of the revolution,government expenditures rose by 7.1 percent to LE 392.1 billion (28.5 percent ofGDP), while revenues declined by 3.2 percent to LE 259.6 billion (18.8 percent ofGDP). Accordingly, the overall budget deficit widened by 33.0 percent, to register LE130.4 billion, constituting 9.5 percent of GDP (against some LE 98.0 billion or 8.1percent of GDP a year earlier). The deficit (LE 130.4 billion) is a 19.5 percent abovethe estimated figure for the whole FY. Ratios of Expenditures, Revenues & Overall Deficit / GDP % 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 Revenues Expenditures Deficit To address the consequences of the Egyptian revolution, the government took anumber of measures regarding both expenditures and revenues. On the expendituresside, the government established a compensation fund for individuals and small andmicro enterprises that were negatively affected by the events; appointed, on apermanent basis, some of the temporary-contract employees; increased the number offamilies eligible for the social solidarity pension; disbursed exceptional pensions andcompensations for martyrs families; and established an additional budgetappropriation of LE 10.0 billion to satisfy the basic requirements of subsidizing foodcommodities during the year under review. On the revenues side, the most importantmeasures were: allowing payment in installments of the sales taxes in Jan. and Feb. toprovide the required liquidity for projects; and the prompt release of merchandiseimports without paying the customs duties mandated for Jan. and Feb. 2011 (to bepaid later) to ensure the availability of staple food items. In addition, the governmentexempted those with overdue insurance premiums from delay fines.
65 Central Bank of Egypt – Annual Report 2010/2011 Hereunder is a follow-up of the execution of the consolidated fiscal operationsof the general government in FY 2010/2011, according to the preliminary actual dataof the Ministry of Finance:3/3/1- Budget Sector(Administrative System - Local Administration - Service Authorities) Due to the repercussions of the 25th January Revolution, public revenuesshrank by some LE 8.5 billion or 3.2 percent in the reporting year, to record LE 259.6billion (18.8 percent of GDP). The LE 12.8 billion retreat in the property income ofEGPC, and in other miscellaneous revenues was principally responsible for thedecline. Other factors at work were the drop in customs duties (by LE 0.8 billion), insale proceeds of goods and services, in investments finance (by LE 2.1 billion each),and in some other revenues (by LE 10.3 billion), in addition to the contraction inexternal grants (by LE 2.6 billion). The Relative Structure of Tax Revenues of the Budget Sector 2010/2011 Other Taxes 6.4% Taxes on International Trade 7.2% Taxes on Income 46.8% Taxes on Goods & Services 39.6% The decline would have been larger but for the rise in collected taxes onincomes and profits by LE 13.0 billion or 17.0 percent, on goods and services by LE8.8 billion or 13.1 percent, and on property by LE 363 million or 4.1 percent. Total Revenues ,Tax Revenues & Property Incom e (LE bn) 2010/2011 2009/2010 2008/2009 2007/2008 2006/2007 0 50 100 150 200 250 300 Total Revenues Tax Revenues Property Income
66Central Bank of Egypt – Annual Report 2010/2011 As indicated by preliminary actual figures, expenditures increased by LE 26.1billion or 7.1 percent above the previous fiscal year, registering LE 392.1 billion or28.5 percent of GDP. The increase stemmed mainly from subsidies that rose by LE17.5 billion or 18.7 percent over the previous fiscal year, to stand at LE 111.0 billion,absorbing some 42.8 percent of total revenues. Wages and compensations ofemployees augmented by LE 9.7 billion or 11.4 percent to LE 95.1 billion, draining36.6 percent of public revenues and constituting about 26.8 percent of currentgovernment spending. The Relative Structure of Expenditures 2010/2011 Wages & Compensations of Employees Other Expenditures 24.2% Purchases of 8.0% Goods & Services 6.1% Investments 9.7% Interest 20.7% Subsidies, Grants & Social Benefits 31.3% Interest payments on public debt – domestic and external – accelerated by LE8.7 billion or 12.1 percent to LE 81.1 billion, absorbing 31.2 percent of publicrevenues, and reflecting as such the high burden of debt service. However, someitems decreased, mainly investments of infrastructure projects that markedly fell byLE 10.4 billion or 21.5 percent to LE 38.0 billion, as construction of some projectshave been suspended since the outbreak of the revolution. In addition, purchases ofgoods and services went down by LE 4.3 billion or 15.2 percent under the currentcircumstances.
67 Central Bank of Egypt – Annual Report 2010/2011 Summary of Consolidated Fiscal Operations of the State Budget (LE mn)Revenues 2009/10 2010/11 Expenditures 2009/10 2010/11 Actual Preliminary Actual Actual Preliminary ActualTotal Revenues 268114 259617 Total Expenditures 365987 392097Tax revenues 170494 191626 Compensations of employees (including wages) 85369 95082Taxes on income & profits 76618 89642 Purchases of goods & services 28059 23785Taxes on property 8770 9133 Interest 72333 81081Taxes on goods & services 67095 75892 Subsidies, grants & social benefits 102975 122834Customs 14702 13857 Subsidy 93570 111022Other taxes 3309 3102 Grants 4380 5314Grants 4332 1723 Social benefits 4483 6033Other revenues 93288 66268 Others 542 465Property income 54570 41803 Other expenditures 28901 31363Proceeds of selling goods & services 17212 15160 Defense 23453 26484Financial investments 8873 6755 Other 5448 4879Others 12633 2550 Purchases of non-financial assets (investments) 48350 37952 Against this background, the budget showed a cash deficit of LE 132.5 billionor 9.6 percent of GDP. By adding the net acquisition of financial assets (a negativeLE 2.1 billion) to the cash deficit, the overall deficit would post LE 130.4 billion or9.5 percent of GDP (against LE 98.0 billion or 8.1 percent of GDP a year earlier).Domestic finance sources (especially banks’ subscriptions for TBs in the amount ofLE 74.0 billion, or 56.4 percent of available finance) were mainly used to cover theoverall budget deficit, along with some miscellaneous repayments. External sourcesprovided no more than LE 5.0 billion worth.3/3/2- Budget Sector, NIB and SIFs When adding the fiscal operations of the NIB and SIFs to those of the budgetsector, collected revenues would surge by LE 36.7 billion to LE 296.3 billion (21.5percent of GDP). Likewise, public expenditures would rise by LE 38.5 billion to LE430.6 billion (31.3 percent of GDP). Cash Deficit & Overall Deficit /GDP % 10.0 9.0 8.0 7.0 6.0 2007/2008 2008/2009 2009/2010 2010/2011 Cash Deficit Overall Deficit
68Central Bank of Egypt – Annual Report 2010/2011 Accordingly, the cash deficit of the consolidated fiscal operations of thegeneral government reached LE 134.3 billion in the reporting year. By adding the netacquisition of financial assets (a negative LE 4.3 billion) to that deficit, the overalldeficit would post LE 130.0 billion or 9.4 percent of GDP. Summary of Consolidated Fiscal Operations of the General Government (LE mn) 2009/2010 2010/2011 (Preliminary (Actual ) Actual )Total Revenues 303361 296341Total Expenditures 396768 430641Cash Deficit 93407 134300Net acquisition of financial assets 5479 -4262Overall deficit 98886 130038Financing sources 98886 130038Domestic finance 102415 135560 Banking finance 39380 97625 Non-banking finance 63035 37935Blocked Account Used in AmortizingPart of CBE Bonds 0 0External borrowing 2458 5024Arrears 0 0Others 273 8030Financing Effects for Eliminations -1 -1Exchange rate revaluation 1328 3945Net privatization proceeds 425 22Difference between treasury bills face value & present value -227 -7419Foreign Debt Reclassification Differencesand Related FX Differences 0 0Discrepancy -7785 -15123 The overall deficit of the consolidated fiscal operations of the generalgovernment was mainly financed from local sources, while external sources providedno more than LE 5.0 billion worth.3/4- Balance of Payments and External Trade IN FY 2010/2011, the BOP ran an overall deficit of US$ 9.8 billion(against an overall surplus of US$ 3.4 billion), leading as such to a decline in NIR atthe CBE. Data indicated that in the second half of the year (Jan./June 2011) the BOPrecorded an overall deficit of US$ 10.3 billion (against an overall surplus of US$571.7 million in the first half of it (July/Dec. 2010), in the wake of the events inEgypt and the Arab region that took their toll on tourism revenues and foreigninvestment flows to Egypt.
69 Central Bank of Egypt – Annual Report 2010/2011 There are two basic factors that contributed to the overall deficit (US$ 9.8billion): the current account deficit which retreated by 35.9 percent to record US$ 2.8billion (against US$ 4.3 billion a year earlier), and the capital and financial accountthat unfolded a net outflow of US$ 4.8 billion (against a net inflow of US$ 8.3billion). The decline in the current account deficit was brought about by the fall in tradedeficit, the increase in net unrequited transfers, and the contraction in servicessurplus. The trade deficit narrowed by 5.3 percent to US$ 23.8 billion (against US$25.1 billion), reflecting the rise in merchandise exports by 13.1 percent to US$ 27.0billion, and a comparatively moderate rise in merchandise imports by 3.6 percent toUS$ 50.8 billion. Services surplus went down by 23.8 percent to US$ 7.9 billion (against US$10.3 billion in the previous FY), due to the retreat in services receipts by 7.2 percent,combined with a rise in services payments by 5.8 percent, as illustrated below: Services receipts fell by 7.2 percent to US$ 21.9 billion (against US$ 23.6billion). Services receipts were mostly responsible for the decline: travel receipts(tourism revenues) decelerated by 8.6 percent to only US$ 10.6 billion (against US$11.6 billion), other services receipts shrank by 27.8 percent to US$ 2.7 billion(against US$ 3.7 billion), and investment income receipts almost halved by 49.5percent to register US$ 418.8 million (against US$ 829.0 million). However,transportation receipts went up by 11.8 percent to US$ 8.1 billion (against US$ 7.2billion) due to the 11.9 percent increase in Suez Canal earnings to US$ 5.1 billion(from US$ 4.5 billion). Services payments augmented by 5.8 percent to US$ 14.0 billion (against US$13.2 billion) due to the rise in investment income payments by 24.5 percent to US$6.5 billion, and transportation payments by 12.7 percent to US$ 1.4 billion. In themeantime, government expenditures fell by 27.9 percent to US$ 1.1 billion, travelexpenditures by 9.2 percent to US$ 2.1 billion, and other services payments by only0.5 percent to stand at US$ 2.9 billion.
70Central Bank of Egypt – Annual Report 2010/2011 Net unrequited transfers surged by Development of Unrequited Transfers25.6 percent to US$ 13.1 billion, fueled by US$ bnthe increase in net private transfers by 5.030.2 percent to US$ 12.4 billion (againstUS$ 9.5 billion), recording its highest rate 4.0 4.0of increase in Q4. However, net official 3.3transfers declined by 21.1 percent to only 3.2 3.1 3.0 2.8US$ 752.9 million, following the fall in 2.5 2.8cash grants to the Egyptian government. It 1.9 2.0is worthy to note that remittances ofEgyptians working abroad representedalmost 99.0 percent of private transfers. 1.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009/2010 2010/2011 Capital and financial account Developm ent of Foreign Investm ent in Egyptrealized a net outflow of US$ 4.8 billion US$ bn(against a net inflow of US$ 8.3 billion a 6 5.5 5.9 5year earlier). The noticeable shift was due 4 3 2.4 1.7 1.7 1.6to the fact that portfolio investments in 2 1 1.2 0.9 0.7 0.1 0.4 0.8Egypt reversed from a net inflow of US$ 0 -1 -1.3 -0.2 -1.67.9 billion to a net outflow of US$ 2.6 -2 -3 -4billion, of which US$ 3.1 billion were -5 -5.5 -6foreigners’ investments in Egyptian TBs Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4(outflows). In addition, net FDI in Egypt 2009/2010 2010/2011plunged by 67.6 percent, to post as low asUS$ 2.2 billion (compared with US$ 6.8 Net FDI in Egy pt Net Portf olio Inv estment in Egy ptbillion). The other assets and liabilities recorded a net outflow of US$ 4.2 billion,(against US$ 7.1 billion). The following table shows the main BOP indicators according to GDPestimates and the main changes in the BOP items during FY 2010/2011 and theprevious FY:
71 Central Bank of Egypt – Annual Report 2010/2011 Balance of Payments Indicators FY (%) 2009/2010 2010/2011Trade Balance:- Merchandise exports/GDP 10.9 11.5 • Oil exports / Total exports 43.0 45.0 • Crude oil exports / Oil exports 43.6 46.7- Merchandise imports / GDP 22.4 21.5 • Non-oil imports / Total imports 89.5 88.3 Foodstuff & cereals imports / Non-oil imports 15.5 21.2 • Oil products imports / Total imports 6.7 7.9- Volume of foreign trade / GDP 33.4 33.0- Coverage ratio of merchandise exports / merchandise imports 48.7 53.2- Trade Balance / GDP -11.5 -10.1Services Balance:- Services balance / GDP 4.7 3.3 • Total services receipts / GDP, of which: 10.8 9.3 Suez Canal tolls / GDP 2.1 2.1 Tourism / GDP 5.3 4.5Transfers:- Net transfers / GDP 4.8 5.6 Remittances of Egyptians working abroad/ GDP 4.5 5.3- Current Account / GDP -2.0 -1.2- Current receipts / GDP 26.5 26.3- Current payments / GDP 28.5 27.5- Current receipts / Current payments 93.1 95.7Capital and Financial Account:- FDI in Egypt / GDP 3.1 0.9- Overall Balance / GDP 1.5 -4.1- Months of merchandise and service imports covered by NIR (end of June) 6.8 4.93/4/1- External Trade In FY 2010/2011, the volume of trade expanded by 6.7 percent, registering US$77.8 billion (against US$ 72.9 billion a year earlier). The uptrend came on the back ofthe 13.1 percent increase in export proceeds to US$ 27.0 billion (oil exports rose by18.3 percent and non-oil exports by 9.1 percent). Imports increased as well, albeit at alower pace than exports (3.6 percent), to register US$ 50.8 billion, reflecting the riseof 15.2 percent in oil imports and the fall of 2.3 percent in non-oil imports.
72Central Bank of Egypt – Annual Report 2010/2011 Against this background, the trade deficit narrowed by 5.3 percent, posting US$23.8 billion (against US$ 25.1 billion). Total Volume of Trade US$ bn 100.0 80.0 60.0 40.0 20.0 0.0 -20.0 -40.0 -60.0 2008/2009 2009/2010 2010/2011 Total exports Total imports Trade volume Trade balance3/4/1/1- Distribution of Merchandise Exports Merchandise exports rose by 13.1 percent to US$ 27.0 billion, as a result of thepickup in the exports of semi-finished goods by 28.1 percent, mineral fuels, oils andproducts by 18.5 percent, raw materials by 11.2 percent and finished goods by 7.7percent. The following chart shows the contribution of the different groups ofmerchandise exports to total exports. Proceeds of Merchandise Exports by Degree of Processing 14 12 10 US$ bn 8 6 4 2 0 Fuel, mineral oils Raw materials Semi-finished Finished goods & products goods 2008/2009 2009/2010 2010/2011 The growth of export proceeds was traced to the rise in crude oil and oilproducts, fertilizers and cotton textiles, supported by international price hikes.
73 Central Bank of Egypt – Annual Report 2010/2011 Export Groups by Degree of Processing Proceeds of Merchandise Exports US$ 27.0 bn Mineral fuels Raw materials 5.2 Semi-finished Finished goods and oils 46.7 percent goods 7.7 percent 40.2 percent percentA) Mineral Fuels, Oils and Products: Exports of this group moved up by 18.5 percent to US$ 12.6 billion (againstUS$ 10.6 billion). The public sector shared with 85.7 percent of the total exports ofthis group, followed by the investment sector (11.4 percent) and the private sector(2.9 percent).B) Raw Materials: Exports of raw materials accelerated by 11.2 percent, registering US$ 1.4 billion(against US$ 1.3 billion). The private sector was the main exporter (80.1 percent),followed by the investment sector (11.3 percent) and the public sector (8.6 percent). The most important exports were fresh or frozen vegetables and plants; cotton;edible fruits and nuts; dairy products, eggs and honey; oil seeds and oleaginous fruitsfor manufacturing; and raw skins and hides and tanned leather.C) Semi-Finished Goods: Exports of this group recorded the highest growth rate compared with the othergroups (28.1 percent), posting US$ 2.1 billion (against US$ 1.6 billion). Again, theprivate sector was the main exporter (79.0 percent), followed by the investmentsector (13.5 percent) and the public sector (7.5 percent). The key exports were organic and inorganic chemicals; cast and rolled iron;plastics and articles thereof; cotton textiles; animal and vegetable fats; greases andoils and products and carbon; as well as dyeing and tanning extracts.
74Central Bank of Egypt – Annual Report 2010/2011D) Finished Goods: Exports of finished goods mounted by 7.7 percent to US$ 10.9 billion (fromUS$ 10.1 billion). The private sector was in the lead (86.5 percent), and theinvestment sector came next (10.4 percent) followed by the public sector (3.1percent). The key exports of this group were fertilizers; ready-made garments; cottontextiles; iron and steel products; pharmaceuticals; miscellaneous edible preparations;soap, detergents and artificial waxes; aluminum articles; paper, cardboard paper andarticles thereof.3/4/1/2- Distribution of Merchandise Imports: Imports increased by 3.2 percent to US$ 50.8 billion in FY 2010/2011 (againstUS$ 49.0 billion in the previous FY). Imports of mineral fuels, oils and products roseby 21.9 percent, raw materials by 32.6 percent, investment goods by 4.0 percent andconsumer goods by 0.2 percent. In contrast, imports of intermediate goods fell by 2.8percent. The following chart shows the breakdown of imports by merchandise group,noting that the increase is largely pronounced in oil products; iron ore; wheat; and carspare parts and accessories. Payments for Merchandise Imports by Degree of Use 0.0 -2.0 -4.0 -6.0 US$ bn -8.0 -10.0 -12.0 -14.0 -16.0 -18.0 Fuel, mineral oils & Raw materials Intermediate goods Investment goods Consumer goods products 2008/2009 2009/2010 2010/2011 Import Payments by Degree of Use Merchandise Import Payments US$ 50.8 bn Mineral fuels and Raw Materials Intermediate goods Investment goods Consumer Goods oils 9.2 percent 14.5 percent 31.1 percent 20.5 percent 24.0 percent
75 Central Bank of Egypt – Annual Report 2010/2011A) Mineral fuels, Oils and Products: Imports of mineral fuels, oils and products increased by 21.9 percent to US$ 4.6billion (from US$ 3.8 billion), of which oil products constituted 86.6 percent. Thepublic sector accounted for 69.3 percent of the total imports of this group, followedby the private sector (25.0 percent) and the investment sector (5.7 percent).B) Raw Materials: Imports of this group surged by 32.6 percent, recording US$ 7.3 billion duringthe reporting year (against US$ 5.5 billion in the year before). The private sectorimported 55.8 percent of the total, while the public sector came next with 32.3percent, followed by the investment sector (11.9 percent). Imports of this group were mainly wheat (33.5 percent); crude oil (26.0 percent);maize; tobacco; cereals and iron ore.C) Intermediate Goods: Imports of intermediate goods declined by 2.8 percent, to US$ 15.8 billion(against US$ 16.3 billion). The private sector imported the bulk of 85.0 percent of thetotal, followed by the investment sector (9.3 percent) and the public sector (5.7percent). The major imports were iron and steel products; car parts, spare parts andaccessories; organic and inorganic chemicals; animal and vegetable fats, greases andoils and products; paper, cardboard paper and articles thereof; and wood and itsarticles.D) Investment Goods: Imports of investment goods stepped up by 4.0 percent to US$ 10.4 billion(against US$ 10.0 billion). The private sector ranked first with a share of 78.0percent, the public sector ranked second with 11.3 percent and lastly came theinvestment sector with 10.7 percent. The main imports of the group were cranes and bulldozers, electric motors,generators and transformers and computers; electrical apparatus for line telephony orline telegraphy; pumps, fans and articles thereof; optical photographic, cinema-tographic and medical appliances and parts.
76Central Bank of Egypt – Annual Report 2010/2011E) Consumer Goods: Imports of consumer goods slightly rose by 0.2 percent to US$ 12.3 billion inthe reporting year, compared to US$ 12.2 billion a year earlier. The rise reflected theincrease in the imports of non-durable goods (by 5.6 percent to US$ 9.4 billion).Conversely, imports of durable goods decreased by 14.1 percent, reaching US$ 2.9billion. The private sector accounted for 87.2 percent of the total. The investmentsector came second with 7.2 percent, while the public sector shared with 5.6 percent. The key imports of durable goods were cars; household electric appliances; andhousehold refrigerators and freezers. On the other hand, the most prominent importsof non-durable goods were pharmaceuticals; meat; miscellaneous edible preparations;ready-made clothes; edible vegetables, roots and tubers; cotton textiles; and dairyproducts, eggs, birds and honey.3/4/1/3- Sectoral Breakdown of External Trade The private sector contributed 64.4 percent of the total volume of trade. Thepublic sector came next (25.8 percent) followed by the investment sector (9.8percent). Relative Structure of The Volume of Trade by Economic Sector FY 2010/2011 Investment sector Public sector 9.8% 25.8% Private sector 64.4%A) The Private Sector: The volume of trade of the private sector grew by 6.2 percent to US$ 50.1billion; exports made up 25.0 percent and imports 75.0 percent. To elaborate, exports of this sector mounted by 10.1 percent, standing at US$12.5 billion (46.4 percent of total exports), against US$ 12.5 billion. Finished goodsrepresented 74.9 percent. The main exports were fertilizers; ready-made garments;cotton textiles; chemicals; iron and steel products; pharmaceuticals; cast iron andsemi-finished goods; soap, detergents and artificial waxes; and paper, cardboardpaper and articles thereof.
77 Central Bank of Egypt – Annual Report 2010/2011 Likewise, its imports rose by 5.0 percent to US$ 37.5 billion (73.9 of totalimports), against US$ 35.7 billion. Intermediate goods made up 35.8 percent andconsumer goods 28.5 percent. Foremost of the imports came iron and steel; car parts,spare parts and accessories; pharmaceuticals; organic and inorganic chemicals; cranesand bulldozers and parts thereof; plastics and articles thereof; and wheat.B) The Public Sector: The volume of trade of the public sector increased by 2.2 percent, to US$ 20.1billion (exports represented 57.0 percent and imports 43.0 percent). Exports rose by5.0 percent, scoring US$ 11.4 billion (42.4 percent of total exports), compared withUS$ 10.9 billion in the previous year. It is noteworthy that mineral fuels, oils andproducts represented 94.3 percent of the exports of this sector. The most importantexports were crude oil and products; aluminum products; cotton; cotton yarn; castiron and semi-finished products; coal; aluminum; and cotton textiles. On the other hand, imports of this sector declined by 1.4 percent to US$ 8.6billion (17.0 percent of total imports) against US$ 8.8 billion. Mineral fuels, oils andproducts; and raw materials accounted for 37.3 percent and 27.5 percent,respectively, of public sectors imports. Salient of its imports were crude oil andproducts; wheat; animal and vegetable fats, greases and oils and products; electricmotors, generators and transformers and parts thereof; railway and tramwaylocomotives or rolling stock and parts; and tobacco.C) The Investment Sector: The share of the investment sector in trade exchange climbed by 25.6 percent toUS$ 7.6 billion, of which exports made up 39.5 percent and imports 60.5 percent. Itsexports increased by 89.9 percent to US$ 3.0 billion (against US$ 1.6 billion).Mineral fuels, oils and products represented 47.8 percent of the exports of this sector,while finished goods contributed 37.5 percent. The chief exports were oil products;fertilizers; ready-made garments; cotton textiles; organic and inorganic chemicals;carpets and other floor coverings; cotton, cast iron and semi-finished goods; andceramic products. Likewise, the imports of this sector went up by 2.9 percent to US$ 4.6 billion(intermediate goods accounted for 31.7 percent and investment goods for 24.2percent of its total imports). Major imports were animal and vegetable fats, greasesand oils and products; cranes and bulldozers and parts thereof; wheat; spare parts andaccessories of cars; oil and products; iron and steel products; and plants andvegetables.
78Central Bank of Egypt – Annual Report 2010/20113/4/1/4- Geographical Distribution of Merchandise Transactions Statistics revealed an uptrend in Egypts trade with all groupings (except for theUnited States of America and the Russian Federation). Most of the increase (32.4percent) was in the trade with Italy, Switzerland, the United Kingdom, Germany, andChina. Volume of Trade US$ 77.8 bn EU Countries 38.0 % Asian (Non-Arab) Countries 19.1% Arab Countries 14.8% United States of America 12.3% Other European Countries 9.2% Australia and Other Countries & Regions 3.8% A ِ frican (Non-Arab) Countries 1.5% Russian Federation & C.I.S 1.3%A) EU Countries: The volume of trade between Egypt and the EU countries rose by 12.0 percent toUS$ 29.5 billion in the reporting year. The rise was a result of: − The increase of exports to those countries by 34.9 percent to US$ 11.4 billion (mineral fuels, oils and products accounted for 58.7 percent and finished goods for 31.5 percent). Exports of this group contributed 42.4 percent of total exports, mostly representing crude oil and products; fertilizers; pharmaceuticals; cotton textiles; aluminum products; ready-made garments; iron and steel products; organic and inorganic chemicals; ceramic products; and carpets and other floor coverings. − The rise in imports (by 1.2 percent) from this group at a lower rate than exports, registering US$ 18.1 billion (intermediate goods accounted for 32.6 percent, investment goods for 25.2 percent and consumer goods for 21.1 percent). Notably, imports of this group represented 35.6 percent of total imports. Imports from the EU countries included, for the most part, crude oil
79 Central Bank of Egypt – Annual Report 2010/2011 and products; pharmaceuticals; iron and steel products; wheat; cranes and bulldozers; organic and inorganic chemicals; vegetable and animal fats, greases and oils, and products; wood and products; and car parts, accessories and spare parts. Against this background, the trade deficit between Egypt and the EU shrank by29.2 percent, registering US$ 6.7 billion.B) Asian (Non-Arab) Countries: The volume of trade between Egypt and Asian (non-Arab) countries scaled upby 6.9 percent, amounting to US$ 14.9 billion, due to the confluence of thefollowing: − The growth of exports by 18.4 percent to US$ 4.0 billion or 14.9 percent of total exports (mineral fuels and oils contributed 72.2 percent and finished goods 18.1 percent). In the forefront of exports came crude oil and products; ready-made garments; cotton textiles; cotton; glass and products; organic and inorganic chemicals; cotton yarn; fertilizers; iron and steel products; cast iron, semi-finished products and rolled iron; and dyed leather. − The pickup in imports by 3.2 percent, recording US$ 10.8 billion or 21.4 percent of total imports (intermediate goods represented 35.9 percent and consumer goods 35.8 percent). The key imports were car parts, spare parts and accessories; ready-made garments; cars; vegetable and animal fats, greases and oils; synthetic fibers; plastics and articles thereof; organic and inorganic chemicals; cotton textiles; electric-mechanic household appliances with electric motor; crude oil and products; and meat. In this setting, the trade deficit fell by 4.1 percent to US$ 6.8 billion.C) Arab Countries: The volume of trade with the Arab countries also expanded by 13.2 percent,registering US$ 11.5 billion, influenced by the following: − The rise of exports to the Arab countries by 2.2 percent to US$ 4.9 billion (18.0 percent of total exports), of which finished goods and mineral fuels and oils represented 67.5 percent and 12.8 percent, respectively. The key exports were natural gas; fertilizers; iron and steel products; cast iron, semi-finished products and rolled iron; organic and inorganic chemicals; oil products; cars, tractors and bicycles; paper, cardboard paper and articles thereof; ceramic products; glass and articles thereof; and pharmaceuticals.
80Central Bank of Egypt – Annual Report 2010/2011 − Imports also increased by 22.9 percent, registering US$ 6.6 billion or 13.1 percent of total imports (of which raw materials, intermediate goods, and consumer goods made up 29.3 percent, 27.1 percent and 18.8 percent, in order). The main imports were crude oil and products; plastics and articles thereof; iron and steel products; organic and inorganic chemicals; electric motors and engines and parts thereof; paper, cardboard paper and articles thereof; computers; pharmaceuticals; and cars. Consequently, the trade deficit widened to US$ 1.8 billion in the reporting year,against US$ 0.6 billion in the preceding FY.D) United States of America: The volume of trade with the USA declined by 1.4 percent, reaching US$ 9.6billion, in the light of: − The retreat of exports to the USA by 18.3 percent to US$ 3.6 billion (finished goods accounted for 50.8 percent and mineral fuels and oils for 37.8 percent). The major exports were fertilizers; ready-made garments; crude oil and products; cotton textiles; organic and inorganic chemicals; iron and steel products; paper, cardboard paper and articles thereof; carpets and other floor coverings; cast iron, semi-finished products and rolled iron; pharmaceuticals; and cement. Notably, the USA received 13.3 percent of total exports. − The rise in imports from the USA by 12.7 percent to US$ 6.0 billion, representing about 11.8 percent of total imports (raw materials constituted 26.7 percent, investment goods 24.4 percent and intermediate goods 23.4 percent). The main imports were wheat; crude oil and products; cranes, bulldozers and parts thereof; iron and steel products; organic and inorganic chemicals; meat; car spare parts and accessories; pumps and fans and parts thereof; computers; cement; animal and vegetable fats, greases and oils and products; and coal. In view of the above mentioned developments, the trade deficit between Egyptand the USA rose to US$ 2.4 billion in the reporting year, compared to US$ 0.9billion a year earlier.E) Other European Countries: The volume of trade with the other European countries edged up by 0.5% toUS$ 7.1 billion, because of:
81 Central Bank of Egypt – Annual Report 2010/2011 − The rise of exports by 58.9 percent to US$ 1.7 billion (6.3 percent of total exports), of which finished goods and semi-finished goods accounted for 49.3 percent and 22.5 percent in order. The most salient exports were oil products; organic and inorganic chemicals; ready-made garments; fertilizers; cotton textiles; iron and steel products; cast iron, semi-finished goods and rolled iron; cotton; carbon; and pharmaceuticals. − The drop in imports by 9.9 percent to US$ 5.4 billion (10.7 percent of total imports), of which intermediate goods represented 31.0 percent, mineral fuels and oils 23.5 percent and consumer goods 19.3 percent. Foremost of the imports came crude oil and products; iron and steel products; wheat; pharmaceuticals; animal and vegetable fats, greases and oils; organic and inorganic chemicals; wood and products thereof; synthetic fibers; cranes and bulldozers; tobacco; and raw sugar. Consequently, the trade deficit scaled down by 24.9 percent to US$ 3.7 billion inthe reporting year.F) Australia and Other Countries and Regions: The volume of trade with Australia and other countries and regions decreased by7.9 percent, posting US$ 2.9 billion, as a result of: − The fall in the exports to those countries by 50.0 percent to US$ 0.6 billion (2.3 percent of total exports), of which mineral fuels and oils contributed the major part of 82.6 percent compared with 10.3 percent for finished goods. The main exports were crude oil and products; organic and inorganic chemicals; iron and steel products; cast iron, semi-finished goods and rolled iron; paper, cardboard paper and article thereof; sugar and sugar con- fectionery; animal and vegetable fats, greases and oils; and pharmaceuticals. − The increase in imports by 19.2 percent to US$ 2.3 billion (4.6 percent of total imports), of which consumer goods shared with 39.2 percent, raw materials with 28.6 percent and intermediate goods with 26.8 percent. The key imports were meat; iron ore; crude oil and products; iron and steel products; wheat; animal and vegetable fats, greases and oils and products; paper, cardboard paper and articles thereof; dairy products, eggs, birds and natural honey; maize; oil seeds and oleaginous fruits; and raw sugar. The trade deficit between Egypt and this group widened to US$ 1.7 billion in thereporting year.
82Central Bank of Egypt – Annual Report 2010/2011G) African (Non-Arab) Countries: Trade exchange between Egypt and the African (non-Arab) countries stepped upby 24.2 percent to US$ 1.2 billion, as a result of: − The surge in exports to those countries by 42.5 percent to US$ 0.5 billion (2.0 percent of total exports); of which 71.8 percent were finished goods. Foremost of the exports came oil products; organic and inorganic chemicals; iron and steel products; paper, cardboard paper and products thereof; sugar and sugar confectionery; animal and vegetable fats, greases and oils and products; pharmaceuticals; cast iron, semi-finished goods and rolled iron; cement; ceramic products; and vegetable and fruit preparations. − The rise in imports by 11.7 percent to US$ 0.6 billion (1.2 percent of total imports), of which the share of consumer goods was 33.5 percent, intermediate goods 33.2 percent and raw materials 24.8 percent. The most important imports were copper and articles thereof; tea; tobacco; wheat; parts, accessories and spare parts of cars; cranes and bulldozers; iron and steel products; paper, cardboard paper and products thereof; wood and products thereof; meat; live animals; pharmaceuticals; and oil seeds and oleaginous fruits. On the back of the previous changes, the trade deficit more than halved (fallingby 54.0 percent), to register US$ 82.4 million in 2010/2011 (against US$ 179.1million in the year before).H) Russian Federation and C.I.S Countries: The volume of trade between Egypt and this group declined by 29.6 percent,standing at US$ 1.0 billion, on the back of: − The growth of exports by 59.8 percent to US$ 0.2 billion (0.7 percent of total exports), of which finished goods contributed the bulk of 60.4 percent and raw materials 36.8 percent. The main exports were citrus fruit; potatoes; paper, cardboard paper and products thereof; cars, tractors and bicycles; pharmaceuticals; ready-made garments; leather products; carpets and other floor coverings; and cement. − The slump of imports from this group by 37.5 percent to US$ 0.8 billion (1.7 percent of total imports), of which intermediate goods accounted for 45.3 percent and raw materials 24.1 percent. Salient of the imports were iron and steel products; wheat; wood and products thereof; maize; animal and vegetable fats, greases and oils; organic and inorganic chemicals; coal; fertilizers; and parts, accessories and spare parts of cars. As a reflection of all the previous, the trade deficit reached US$ 0.7 billion in thereporting year, against US$ 1.2 billion.
83 Central Bank of Egypt – Annual Report 2010/20113/4/1/5- Contribution of Main Commodities to the Volume of External Trade: Trade of all merchandise groups stepped up, with the exception of machineryand electric appliances. The following chart reveals the volume of trade of allmerchandise groups and their respective shares in the FY 2010/2011. Volume of Trade US$ 77.8 bn Exports 12.1 bn Oil & Products 23.2% Imports 5.9 bn Exports 1.2 bn Foodstuffs 8.5% Imports 5.4 bn Exports 0.2 bn Cereals 5.5% Imports 4.1 bn Exports 2.3 bn Cotton & Textiles 5.9% Imports 2.3% Exports 2.9 bn Chemicals 9.7% Imports 4.7 bn Exports 0.8 bn Machinery & Electric Appliances 7.9% Imports 5.4 bn Exports 2.1 bn Base Metals & Products 9.3% Imports 5.1 bn Exports 0.7 bn Vehicles & Means of Transportation 8.1% Imports 5.6 bn Exports 4.7 bn Other Goods 21.9% Imports 12.3 bn
84Central Bank of Egypt – Annual Report 2010/20113/4/2- Balance of Services and TransfersA. Balance of Services: Services surplus declined by 23.8 percent, reaching US$ 7.9 billion in thereporting year (against US$ 10.3 billion). The following are the causes: - Services receipts decreased by 7.2 percent, to post US$ 21.9 billion (against US$ 23.6 billion) owing to the decline in most items, principally: Services Receipts Item s as a Percentage of Total Services Receipts % 60.0 2009/2010 49.2 48.4 50.0 2010/2011 40.0 36.9 30.6 30.0 20.0 15.7 12.2 10.0 3.5 1.9 0.9 0.5 0.0 Transportation Travel Investment Income Government Other Receipts Receipts - Tourism revenues° dropped by 8.6 percent, to stand at US$ 10.6 billion (against US$ 11.6 billion) primarily on the back of the retreat in the number of tourist nights. Analysis of tourism revenues in FY 2010/2011 shows that they plunged by 47.5 percent in the second half of the year (January/June 2011) to US$ 3.6 billion, from US$ 6.9 billion in the first half (July/December 2010). - Other services receipts dropped by 27.8 percent to US$ 2.7 billion (from US$ 3.7 billion) because of the decrease in invisible receipts of the oil sector, proceeds of oil investment services companies and receipts of construction and contracting services. - Investment income receipts rolled back by 49.5 percent, to reach as low as US$ 418.8 million (well below the US$ 829.0 million of the preceding year) brought about by lower interest payments and dividends on bonds and securities.° Calculated on the basis of the number of tourist nights multiplied by the average tourist spending per night.
85 Central Bank of Egypt – Annual Report 2010/2011 - Government receipts nearly halved by 46.0 percent to US$ 117.7 million (from US$ 217.9 million) due to the drop in other government receipts, along with lower expenses of foreign embassies in Egypt, the Arab League, and international institutions. - Breaking the trend, transport receipts rose by 11.8 percent to US$ 8.1 billion (from US$ 7.2 billion) driven by the increase in the Suez Canal earnings by 11.9 percent to US$ 5.1 billion (against US$ 4.5 billion). Earnings of Egyptian navigation companies had also a positive contribution to the overall transport receipts. Interestingly, despite the critical Developm ent of Main Item s of Services Receiptsevents that Egypt and the Arab countries % as a Percentage of GDPhad been through in 2010/2011, Suez 1.6 1.5 1.5 1.4 1.4 1.3 1.3Canal earnings remained broadly 1.2 1.2immune to such events, registering US$ 1 0.8 0.8 0.81.23 billion in the third quarter of the 0.6 0.6year (against US$ 1.1 billion in the 0.4 0.2 0.5 0.5 0.5 0.5 0.5 0.5 0.5corresponding quarter). They even rose 0to US$ 1.3 billion in the fourth quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4(against US$ 1.2 billion in the 2009/2010 2010/2011corresponding quarter). Travel Suez Canal - Services payments increased by 5.8 percent, to reach some US$ 14.0 billion (against US$ 13.2 billion) as an outcome of the following:- Services Paym ents Item s as a percentage of Total Services Paym ents % 50.0 46.2 2009/2010 45.0 39.3 40.0 2010/2011 35.0 30.0 25.0 22.2 20.9 20.0 17.6 15.1 15.0 9.9 11.6 9.3 7.9 10.0 5.0 0.0 Transportation Trav el Inv estment Gov ernment Other Pay ments Income Pay ments - Investment income payments surged by 24.5 percent to US$ 6.5 billion (from US$ 5.2 billion) driven by the increase in direct investment income, as well as financial investment income (portfolio) transferred abroad.
86Central Bank of Egypt – Annual Report 2010/2011 - Transport payments scaled up by 12.7 percent to US$ 1.4 billion (from US$ 1.2 billion) owing to higher transfers by foreign navigation and aviation companies, and Egyptian navigation companies, and transfers for hiring aircrafts abroad. - Government expenditures, in contrast, rolled back by 27.9 percent to US$ 1.1 billion (from US$ 1.5 billion) due to the decline in other government expenses. - Travel payments also dropped by 9.2 percent to US$ 2.1 billion (from US$ 2.3 billion) because of the decrease in the expenses of tourism and medical treatment abroad, lower payments of tourism companies and hotels abroad, and expenses of training and educational missions abroad. - Other services payments slightly declined by 0.5 percent, to stand at US$ 2.9 billion. B- Net unrequited transfers Net Remittances of Egyptians Working Abroadunrequited transfers accelerated by 25.6 as a Percentage of GDP %percent to US$ 13.1 billion, due to the 1.630.2 percent increase in net private 1.5 1.5transfers, to register US$ 12.4 billion 1.4 1.5 1.3(compared with US$ 9.5 billion). Of total 1.2 1.3 1.3 1.3 1.2private transfers, remittances of 1.1Egyptians working abroad accounted for 1 0.9some 99 percent. Net official transfers, 0.8 0.9however, retreated by 21.1 percent to 0.7 0.8 0.6merely US$ 752.9 million, under lower Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4cash grants to the Egyptian government. 2009/2010 2010/2011 Net Current Transfers (Unrequited) (US$ mn) Change 2009/2010 2010/2011 Value %Net Current Transfers(Unrequited) 10463.4 13136.8 2673.4 25.61- Official Transfers (Net) (a+b-c) 954.0 752.9 -201.1 -21.1a- Inward cash grants 563.6 532.9 -30.7 -5.4b- Other inward grants 479.3 249.6 -229.7 -47.9c- Official outward transfers 88.9 29.6 -59.3 -66.72- Private Transfers (Net) (a+b-c) 9509.4 12383.9 2874.5 30.2a- Workers remittances 9753.4 12592.6 2839.2 29.1b- Other transfers 64.0 85.6 21.6 33.8c- Private transfers abroad 308.0 294.3 -13.7 -4.4
87 Central Bank of Egypt – Annual Report 2010/2011 Against this background, the current account deficit contracted by 35.9 percentto US$ 2.8 billion (from US$ 4.3 billion) owing to the pickup in current receipts byUS$ 4.1 billion or 7.1 percent to US$ 62.0 billion (against US$ 57.9 billion).Notably, the rise in current receipts exceeded that of current payments, as the latterwent up by US$ 2.6 billion or 4.1 percent, to post US$ 64.8 billion (against US$ 62.2billion). The following chart highlights current receipts and payments in both thereporting year and year of comparison. Current Receipts & Current Payments US$ bn 2009/2010 30 27.0 2010/2011 25 23.9 23.6 21.9 20 15 10.5 13.1 10 5 0 -5 -10 -15 -13.2 -14.0 -20 -25 -30 -35 -40 -45 -50 -55 -49.0 -50.8 -60 Merchandise Services Receipts Unrequited Merchandise Services Payments Exports Transfers (Net) Imports3/4/3- Capital and Financial Account The capital and financial account Developm ent of Foreign Investm ent In Egyptrevealed a net outflow of US$ 4.8 billionin 2010/2011 (against a net inflow of US$ US$ bn 148.3 billion a year earlier), as an outcome 12of the following developments: 10 8.1 8 7.9 6.8 ∗1- Portfolio investment in Egypt shifted 6 from a net inflow of US$ 7.9 billion to 4 2 2.2 a net outflow of US$ 2.6 billion, of 0 which, US$ 3.1 billion were foreigners -2 -2.6 net transactions on Egyptian TBs -4 -6 (outflows), US$ 316.7 million were -8 their net transactions on shares -10 -9.2 2008/2009 2009/2010 2010/2011 (inflows), and US$ 211.0 million were net transactions on other Egyptian Net FDI in Egypt Net Portfolio Investment in Egypt bonds and notes (inflows).∗ Representing foreigners dealings (net) in securities and Egyptian bonds and notes.
88Central Bank of Egypt – Annual Report 2010/2011 Analyzing such flows showed that they reversed from a net inflow of US$ 4.5billion in the first half of the year (July/December 2010) to a net outflow of US$ 7.1billion in the second half (January/June 2011), as foreigners sold their holdings ofsecurities (especially Egyptian TBs which recorded net sales of US$ 6.1 billion) onthe back of the current events in Egypt.2- Net foreign direct investment in Egypt∗∗ fell by 67.6 percent to only US$ 2.2 billion (from US$ 6.8 billion a year earlier), as a result of the following: - Net foreign direct investment of the oil sector retreated to US$ 191.3 million (outflows), from US$ 3.6 billion (inflows). - Greenfield investments declined to US$ 2.2 billion (inflows), from US$ 2.7 billion. - Proceeds from transfers for purchasing real estate by non- residents fell to US$ 134.0 million, from US$ 305.3 million. - Privatization proceeds (sales of companies and local productive assets to non- residents) went down to US$ 19.2 million from US$ 173.1 million. The following table illustrates the sectoral distribution and the share of eachsector in total FDI in Egypt. (US$ mn) FYSector 2009/2010 Share 2010/2011 Share (%) (%)Total FDI inflows 11008.1 100.0 9574.4 100.0Manufacturing 456.3 4.1 803.9 8.4Agriculture 261.6 2.4 30.4 0.3Construction 303.8 2.8 108.8 1.1Finance 873.9 7.9 114.0 1.2Services 382.6 3.5 207.2 2.2Tourism 246.9 2.2 158.0 1.7Communications and IT 62.8 0.6 7.0 0.1Real estate 305.3 2.8 134.0 1.4Petroleum 7577.4 68.8 7014.7 73.3Undistributed 537.5 4.9 996.4 10.4∗∗ FDI represents foreign investors that own 10 percent or more of the capital of any resident economic entity, or have an effective voice in its management. In Egypt, a foreign investors equity participation shall be at least 10 percent of the capital of any enterprise..
89 Central Bank of Egypt – Annual Report 2010/20113- Other assets and liabilities (the change in banks’ foreign assets and liabilities, the CBE’s non-reserve foreign assets and foreign liabilities and the counterpart of some items included in the current accounts) posted a net outflow of US$ 4.2 billion (against US$ 7.1 billion).4- Medium- and long-term loans and facilities showed a net repayment of US$ 1.5 billion (against US$ 562.5 million) reflecting the increase in total repayments to US$ 2.1 billion (from US$ 1.8 billion), and the decline in total disbursements to only US$ 574.0 million (from US$ 1.3 billion).3/5- Non-Banking Financial Services Sector*3/5/1- Stock Market In FY 2010/2011, progress has been made with the efforts to strengthensupervision over non-banking financial markets and protect dealers’ rights. To thisend, the EFSA proposed an amendment of certain provisions of the ExecutiveRegulations of the Capital Market Law No. 95 of 1992, to revise mutual fundsregulations, in accordance with the international best practices. The amendmentsfocused on shortcutting the procedures of establishing a fund to just one step; andobliging management services companies to seek the assistance of professional assetappraisers. The EFSA also issued the principle standards for professionalperformance to ensure the integrity and independence of the companies licensed toact as financial advisers and render appraisal services. The proposed standardsinclude the following: (a) no company shall be entitled to practice the activity offinancial consultancy on securities without obtaining a practice-precedent licensefrom the EFSA; (b) the company shall prepare a general guideline describing theprocedures followed thereby for rendering financial consultancy; (c) the company, inthe course of dealing with customers, shall avoid granting privileges, incentives orinformation to certain customers and denying the same to the others; (d) the companyshall set an internal control system preventing analysts from carrying out anyappraisals with false or misleading results; (e) the company shall make sure that nocommon interest, or conflict of interests, may exist between the company and theapplicant or the appraised company; and (f) the company shall immediately discloseto the EFSA any suspicion of conflict of interests between the company and the otherappraised company or any of its affiliates. A number of laws and legislations regulating the capital market were revisedduring the reporting year, and amendments were made to listing and disclosure rules,as the EFSA announced the regulations governing the application of Article (16) ofthe rules of listing and delisting of securities on the Egyptian Exchange. The* Source: EFSA - monthly reports of the EGX.
90Central Bank of Egypt – Annual Report 2010/2011regulations state that any company practicing activity in the market has to provide theEFSA and the EGX with a briefing of the minutes of its board of directors’ meetings,prior to the first trading session following such meetings, in case of the occurrence ofa material event that should be disclosed, without prejudice to the confidentiality ofthe company’s business. Aware of the importance of microfinance companies as a key ingredient offinancial markets, the EFSA proposed a draft to regulate their activities and setcontrols for the selection of borrowers and monitoring and collection of loans; thepermissible financial services and operational activities; rules of ownership andgovernance, and principles for the protection of the entities operating in this fieldaccording to international best practices. To protect the interests of brokerage firms, Ministerial Decree No. 345 wasissued on 10 March 2011, amending some provisions of the Executive Regulations ofthe Capital Market Law regarding the modification of the percentages of buyingsecurities on margin. Accordingly, the liabilities percentage that must be reduced by adebtor, either by cash payments or by collaterals, is adjusted to be in excess of 70%(rather than 60%), at the time of the financial re-evaluation of stocks purchased onmargin at the end of each business day, according to their market value. Thecustomers liabilities percentage of 70 percent that necessitates taking procedures tosell his shares and liquidate his warranties, was also modified to be 80% of themarket value of securities. The Ministerial Decree No. 355 was issued on 13 March 2011, amending someprovisions of the Decree establishing a fund for safeguarding securities dealersagainst non-commercial risks arising from exceptional circumstances andemergencies. By virtue of this amendment, the fund may form a portfolio (limited to10% of its resources) to face any slump in the prices of the securities listed on theExchange, by purchasing securities to strike some balance between supply anddemand in the market, yet without detriment to the fund’s ability to provide adequateliquidity as may be required to meet any compensation requests. The fund may alsostep in, in exceptional circumstances and emergencies, to provide interest bearingloans to its members, to support their market activities, with a maximum limit of 20percent of the fund’s financial resources, according to the rules to be set by the fundsboard of directors and approved by EFSA. The EGX benchmark index (EGX 30) fell by 10.9 percent in FY 2010/2011,recording 5373.0 points at end of June 2011. Similarly, the CMAs index moveddown by 36.0 percent, posting 850.5 points at end of June, due to the disruptiveeffects of the revolution. However, EGX 70 (comprises small and mediumenterprises) and EGX 100 inched up by 19.3 percent and 7.1 percent, respectively,registering 629.6 points and 972.9 points, in order at the end of the FY.
91 Central Bank of Egypt – Annual Report 2010/2011 The third quarter of FY 2010/2011 (January/March) witnessed the closure ofthe Egyptian Stock from 28 January to 22 March 2011 (38 consecutive tradingsessions) amid the unprecedented events attending the 25 January Revolution.Trading over the counter was also suspended till 28 March, following the sharpdecline of 16 percent in the benchmark index (EGX 30) on 26 and 27 January,closing at 5646.5 points (against 6723.2 points before the outbreak of the events). Onthe first day of the resumption of trading (23 March), the index lost 23.5 percent ascompared with its pre-revolution level, registering the third daily record low since itslaunch on 2 February, 2003. Such a downtrend reflected enormous sales by investorstriggered by worries about further losses. In this setting, the EGX took a number ofexceptional actions and measures to bolster investors confidence (Egyptians andforeigners alike) in the market. CMA & EGX 30 Indices The Egyptian Exchange w as closed in the w ake of the th Revolution of 25 of Point January 7300 6300 5300 4300 3300 2300 1300 300 09 Au .09 Fe 0 Ju 0 10 Au 0 Fe 1 Ju 1 11 Se 09 O 9 N 09 D 09 Ja 9 M 0 Ap 0 Se .10 O 0 N 10 D 10 Ja 0 M 1 Ap 1 M 0 M 1 1 .1 l.1 1 .1 .0 .0 1 .1 .1 .1 1 .1 r.1 r.1 n. n. b. b. l n. n. n. ay ay ar ar g. . . . . Ju Ju g pt pt ct ct ov ec ov ec Ju CMA EGX 30 As for the primary market, the number of new issues approved by EFSAduring this year reached 2654, at a total value of LE 44.6 billion (against 3426, at atotal value of LE 154.3 billion a year earlier). Issues for new incorporations reached1662 in number (62.6 percent of total issues), at a value of LE 8.5 billion. Thenumber of issues for capital increases reached 992, totaling LE 36.1 billion (81.0percent of total issues). The listing activity on the EGX showed that the number of listed companiesdeclined to 211 at end of June 2011, from 215 at end of June 2010. The marketcapitalization of those companies decreased by 2.5 percent to LE 399.8 billion,because of the fall in the prices of most traded shares on the EGX, following theevents of the 25 January Revolution.
92Central Bank of Egypt – Annual Report 2010/2011 The value of issued and listed bonds surged by LE 53.2 billion or 31.0 percentin the year under review, posting LE 224.8 billion at end of June 2011, due to the riseof LE 47.0 billion in the value of Egyptian treasury bonds (primary dealers), toregister LE 206.8 billion or 92.0 percent of the total value of listed bonds at end ofJune 2011. Moreover, corporate bonds scaled up by LE 1.3 billion, to LE 6.7 billion.Also, the listed bonds of the New Urban Communities Authority (issued to raisefinance for infrastructure projects) amounted to LE 5.0 billion at end of the year,down by LE 5.0 billion below their issued value (LE 10 billion), as a consequence ofthe amortization of the second tranche of the first and second issues of fixed-interestbonds on their maturity dates in April and June 2011. As for the secondary market, the relevant three indicators (number oftransactions, and number and value of traded securities) pointed to a decline in thereporting year, relative to the previous FY, on the back of the events experienced byEgypt. The number of transactions dropped by 4956 thousand or 40.9 percent, and sodid the number of traded securities (shares and bonds) by 9644 million or 29.3percent, compared with the previous FY, posting 23236 million papers. Likewise,their value decreased by LE 240.7 billion or 54.5 percent, to LE 200.6 billion. Share transactions accounted for the bulk of trading on the EGX during FY2010/2011 (77.5 percent of total transactions, against 89.1 percent the previous FY).In the meantime, trading in bonds represented 22.5 percent of the total (against 10.9percent). Turning to the market of small and medium enterprises (NILEX), the numberof listed companies reached 18 at end of June 2011. The market capitalization oflisted shares on NILEX amounted to some one billion Egyptian pounds (against LE0.4 billion at end of June 2010). Traded securities reached 22 million papers through8224 transactions, with a total value of LE 228 million during FY 2010/2011.
93 Central Bank of Egypt – Annual Report 2010/2011 Trading in Securities FY 2007/2008 2008/2009 2009/2010 2010/2011No. of Transactions (000) 12974 13169 12116 7160A- Shares, bonds and mutual funds’ certificates (listed) 12374 12123 11383 7068B- Shares, bonds and mutual funds’ certificates (unlisted) 600 1046 733 84C- Small and Medium Enterprises Market (NILEX)* - - - 8No. of Traded Securities (mn) 23615 31956 32880 23236A- Shares, bonds and mutual funds’ certificates (listed) 19441 25455 25362 21048B- Shares, bonds and mutual funds’ certificates (unlisted) 4174 6501 7518 2166C- Small and Medium Enterprises Market (NILEX)* - - - 22Value of Transactions (LE mn) 610591 319682 441315 200578A- Shares, bonds and mutual funds’ certificates (listed) 544129 278383 312141 182890B- Shares, bonds and mutual funds’ certificates (unlisted) 66462 41299 129174 17460C- Small and Medium Enterprises Market (NILEX)* - - - 228Source: EFSA- monthly reports of the EGX.*Trading on NILEX started on June 3, 2010. Foreigners transactions on EGX stepped down by 31.6 percent, below theprevious FYs level, scoring LE 88.7 billion (against LE 129.7 billion). Theirtransactions resulted in net purchases of LE 2.0 billion (against LE 5.6 billion theprevious FY). Foreign Investors Transactions during the FY LE bn 91 Purchases 76 Sales Net 61 46 31 16 1 2009/2010 2010/2011
95 Central Bank of Egypt – Annual Report 2010/2011 Statistical Section(1) Central Bank of Egypt(1/1) Reserve Money and Counterpart Assets(1/2) Banknote Issued by Denomination(1/3) Transactions via RTGS and SWIFT(2) Monetary Developments(2/1) Banking Survey: Domestic Liquidity and Counterpart Assets(2/2) Banking Survey: Deposits in Local Currency(2/3) Banking Survey: Deposits in Foreign Currencies(2/4) Banking Survey: Foreign Assets and Liabilities(2/5) Banking Survey: Domestic Credit and Other Items (Net)(2/6) Total Saving Vessels(3) Domestic and External Debt(3/1) Gross Domestic Debt(3/2) NIB Resources & Uses(3/3) External Debt(3/4) Distribution of External Debt by Main Currency(4) Banking System(4/1) Structure of the Egyptian Banking System(4/2) Representation Offices of Foreign Banks in Egypt Registered with the CBE (on June 30, 2011)(5) Banks(5/1) Aggregate Financial Position(5/2) Deposits by Maturity(5/3) Deposits by Sector(5/4) Lending and Discount Balances by Sector
96Central Bank of Egypt – Annual Report 2010/2011 (6) Domestic Economic Indicators (6/1) GDP at Factor Cost by Economic Sector at 2006/2007 Prices (6/2) GDP by Expenditure at 2006/2007 Prices (6/3) Consumer Price Index (Urban Population) (January 2010 =100) (6/4) Producer Price Index (PPI) (2004/2005 =100) (7) Public Finance (7/1) Summary of Consolidated Fiscal Operations of General Government 2009/2010 –2010/2011 (7/2) Summary of Consolidated Fiscal Operations of General Government 2009/2010 –2010/2011 (8) External Transactions (8/1) Balance of Payments (US$) (8/2) Average Exchange Rates (In Piasters Per Foreign Currency Unit) (9) Financial Market Developments (9/1) Trading in Shares on the Egyptian Exchange (9/2) Trading in Bonds on the Egyptian Exchange (9/3) Foreigners Transactions on the Egyptian Exchange
(1/1) CBE Financial Position: Reserve Money and Counterpart Assets (LE mn) End of June 2005 2006 2007 2008 2009 2010 2011Reserve Money 101080 116050 134126 169911 175104 203071 250992 * Currency in circulation outside CBE 67241 78604 92174 111412 126268 144253 179096 Banks deposits in local currency 33839 37446 41952 58499 48836 58818 71896Counterpart Assets 101080 116050 134126 169911 175104 203071 250992Net Foreign Assets 37295 61302 95372 180333 171732 190234 147197 Central Bank of Egypt - Annual Report 2010/2011Foreign Assets 108738 129477 160197 182021 173055 198605 156331 Gold 4500 6429 6744 8695 9385 12393 16343 Foreign securities 16665 48353 108606 151175 150556 162247 114608 Foreign currencies 87573 74695 44847 22151 13114 23965 25380 +Foreign Liabilities 71443 68175 64825 1688** 1323 8371 9134Net Domestic Assets 63785 54748 38754 -10422 3372 12837 103795Net Claims on Government 122264 114055 117254 81872 68613 80611 102562 Claims; of which: 227367 171808 192192 159697 146899 150288 189620 Government securities 208021 164761 166724 123123** 121708 121533 130597 Deposits 105103 57753 74938 77825 78286 69677 87058Net Claims on Banks -21983 1018 59512 77581 334 29010 147 Claims 11572 17412 77270 97828 21786 49863 23496 Deposits in foreign currencies 33555 16394 17758 20247 21452 20853 23349 +Other Items (Net) -36496 -60325 -138012 -169875 -65575 -96784 1086 Assets 49071 41743 39141 25233** 28978 15431 10114 97 Liabilities 85567 102068 177153 195108 94553 112215 9028Source : Central Bank of Egypt.* Including subsidiary coins issued by the Ministry of Finance.** At the end of June 2008, the CBE and the government agreed on using part of the rescheduled debts -under Paris Club agreement- which are not yet due, tosettle part of the government debt to the CBE.+ According to the updated statistical treatment adopted by the IMF, SDR allocations are to be classified as foreign liabilities rather than capital accounts, as of August 2009.
Central Bank of Egypt - Annual Report 2010/2011 98 (1/2) CBE: Banknote Issued By Denomination ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total 67753 79253 93499 112705 127912 146220 180118Currency by Denomination + 67527 79017 93240 112430 127625 145914 179794 PT 25 120 136 144 147 160 184 161 PT 50 220 241 240 252 309 294 303 LE 1 517 545 565 608 772 845 909 LE 5 1279 1121 1071 1169 1309 1619 2738 LE 10 5074 4274 3470 2938 2991 2930 2983 LE 20 10329 9226 8796 7394 6419 5619 9950 LE 50 24517 27959 28152 25646 23045 18836 22350 LE 100 25471 35515 47552 54987 61561 69299 73444 LE 200* 3250 19289 31059 46288 66956Subsidiary Coins** 226 236 259 275 287 306 324Source : Central Bank of Egypt.+ Including coin denominations of 50 and 100 piasters.* The LE 200 note has been in circulation as of May 2007.** Issued by the Ministry of Finance.
(1/3) CBE: Transactions via RTGS and SWIFT During FY 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011Local Currency Transactions via RTGS* 1- Automated Clearing House (ACH) Central Bank of Egypt - Annual Report 2010/2011 Number of transactions (thousand) 9508 10481 11724 12062 12994 13012 Value of transactions (LE mn) 288715 356900 483113 548038 584546 626757 2- Other Transactions via RTGS ** Number of transactions (in unit) 404776 525236 700668 897205 1191374 1248692 Value of transactions (LE mn) 1658794 2280198 3092401 5294357 13274677 15879701Foreign Currency Transfers (Dollar Interbank Transactions) via the Fin-Copy System*** Number of transactions (in unit) 11049 12070 13925 12365 12204 15066 Value of transactions (US$ mn) 39773 78997 105587 83019 70008 88052* The RTGS was launched on 15 /3/ 2009.** Including corridor operations and deposits for monetary policy purposes as of 15/3/2009. 99*** This service was introduced on 19/ 9/ 2004.
100 (2/1) Banking Survey : Domestic Liquidity and Counterpart Assets Central Bank of Egypt - Annual Report 2010/2011 ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011First : Domestic Liquidity 493884 560356 662688 766664 831211 917459 1009411a - Money Supply 89685 109274 131290 170579 182991 214040 248707 Currency in circulation outside the banking system 63029 74239 86860 104656 118146 135209 167887 Demand deposits in local currency 26656 35035 44430 65923 64845 78831 80820b - Quasi-Money 404199 451082 531398 596085 648220 703419 760704 Time & saving deposits in local currency 283020 314188 377424 436268 481054 545303 583732 Demand and time & saving deposits in foreign currencies 121179 136894 153974 159817 167166 158116 176972Second : Counterpart Assets Net foreign assets 80913 133385 218629 303680 * 254134 282408 253500 Domestic credit 466771 509532 531314 570953* 695326 775268 892766 Other items (net) -53800 -82561 -87255 -107969 -118249 -140217 -136855Source : Central Bank of Egypt.* Rescheduled debts settled under Paris Club agreement.
(2/2) Banking Survey : Deposits in Local Currency ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total Deposits in Local Currency 309676 349223 421854 502191 545899 624134 664552First : Demand Deposits 26656 35035 44430 65923 64845 78831 80820 Central Bank of Egypt - Annual Report 2010/2011 Public business sector * 3027 4934 6278 8698 7145 8938 6670 Private business sector 12228 15863 20681 34301 33240 41246 43324 Household sector 11985 14831 18378 24003 25235 29510 31645 Minus: Purchased cheques & drafts 584 593 907 1079 775 863 819Second : Time and Saving Deposits 283020 314188 377424 436268 481054 545303 583732 Public business sector * 13700 15465 17186 20736 21654 23788 22608 Private business sector 27439 25580 56823 85415 71076 73183 60736 Household sector 241881 273143 303415 330117 388324 448332 500388Source : Central Bank of Egypt. 101* Including all public sector companies subject or not to Law No. 203 for 1991.
Central Bank of Egypt - Annual Report 2010/2011 102 (2/3) Banking Survey : Deposits in Foreign Currencies ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total Deposits in Foreign Currencies 121179 136894 153974 159817 167166 158116 176972First : Demand Deposits 18140 18533 26917 26581 32050 33901 41298 Public business sector * 1249 935 947 943 1334 1055 1248 Private business sector 10234 10417 18453 17417 21104 22313 26039 Household sector 6823 7392 7689 8404 9712 10673 14077 Minus: Purchased cheques & drafts 166 211 172 183 100 140 66Second : Time and Saving Deposits 103039 118361 127057 133236 135116 124215 135674 Public business sector * 2946 4734 5774 8202 7401 5419 6301 Private business sector 21103 28845 30641 39785 37217 32594 34202 Household sector 78990 84782 90642 85249 90498 86202 95171Source : Central Bank of Egypt.* Including all public sector companies subject or not to Law No. 203 for 1991.
(2/4) Banking Survey : Foreign Assets and Liabilities ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Net Foreign Assets 80913 133385 218629 303680 254134 282408 253500 Central Bank of Egypt - Annual Report 2010/2011First : Foreign Assets 174328 218982 304968 330770 282913 322209 295480 Central Bank of Egypt 108737 129477 160197 182021 173055 198605 156331 Banks 65591 89505 144771 148749 109858 123604 139149Second : Foreign Liabilities 93415 85597 86339 27090 28779 39801 41980 Central Bank of Egypt 71443 68176 64825 1688 * 1323 8371 9134 Banks 21972 17421 21514 25402 27456 31430 32846Source : Central Bank of Egypt. 103* Due to settling rescheduled debts with the government.
Central Bank of Egypt - Annual Report 2010/2011 104 (2/5) Banking Survey : Domestic Credit and Other Items (Net) ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011First : Domestic Credit 466771 509532 531314 570953 695326 775268 892766 Net claims on the government (A+B-C) 159889 184131 178323 174005 273122 326141 437337 A- Securities 311375 295974 278011 271788** 397804 440410 542792 B- Credit facilities 41364 28044 52151 67732 55939 68140 98826 C- Government deposits 192850 139887 151839 165515 180621 182409 204281 Claims on public business sector * 37420 32888 24446 26897 33146 29985 32981 Claims on private business sector 228195 239338 268607 291719 304470 326350 323241 Claims on household sector 41267 53175 59938 78332 84588 92792 99207Second : Other Items (Net) -53800 -82561 -87255 -107969 -118249 -140217 -136855 Capital accounts -94179 -102139 -114534 -135401 -148332 -170877 -146543 Net unclassified assets and liabilities 40379 19578 27279 27432** 30083 30660 9688Source : Central Bank of Egypt.* Including all public sector companies subject or not to Law No. 203 for 1991.** Due to settling rescheduled debts with the government.
(2/6) Total Saving Vessels ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011 Central Bank of Egypt - Annual Report 2010/2011Total Saving Vessels 498190 560229 655376 742177 803063 794350 855132Savings at the Banking System 404199 451082 531398 596085 648220 703419 760704 Time & saving deposits in local currency 283020 314188 377424 436268 481054 545303 583732 Demand and time & saving deposits in foreign currencies 121179 136894 153974 159817 167166 158116 176972Net Sales of Investment Certificates 58485 63697 68311 79354 81262 90931 94428Post Office Saving Deposits 35506 45450 55667 66738 73581 not available not available 105Source : Central Bank of Egypt.
106 Central Bank of Egypt - Annual Report 2010/2011 (3/1) Gross Domestic Debt ( LE mn )End of June 2006 2007 2008 2009 2010 2011Gross Domestic Debt (1+2+3-4) 587405 630966 658307 755297 888661 10449141- Net Domestic Debt of Government (A+B+C+D+E) 387719 478173 478811 562327 663818 808113A- Balances of Bonds & Bills 349957 562897 568960 681838 779232 916976 Treasury bonds with the CBE 164016 165980 122378 121708 121533 130596 Local currency bonds with public sector banks 4000 4000 4000 4000 4000 4000 Bonds offered abroad *: US$ 5109 3868 3750 4036 6005 7583 LE 0 0 112 3773 3808 3954 Egyptian treasury bonds 58000 57000 78500 92500 159767 206767 Government notes to compensate for the actuarial deficit in social insurance funds 2000 2000 2000 2000 2000 2000 Housing bonds 122 119 117 116 114 115 Foreign currency bonds with public sector commercial banks 12014 11886 11126 11677 11883 0 The equivalent of the retained 5% of corporate profits to purchase government bonds 1552 1588 1636 1700 1764 1830 Bonds of the Insurance Funds (against the transfer of NIB debt to the Treasury) 0 197799 198902 201248 202237 204028 Treasury Bills 103144 118657 146439 239080 266121 356103B- Borrowing from other entities 0 0 0 0 0 2000C- Credit Facilities from the Social Insurance Funds 0 4517 2343 2343 2343 2343D- Net Government Balances with the Banking System -104860 -89241 -92492 -121854 -117757 -113206 x 142622 0 0 0 0 0E- Government Borrowing from NIB2- Borrowing of Economic Authorities (Net) 47387 44557 50123 52255 67771 66290 Net Balances of Economic Authorities with the Banking System -2809 -7177 -1156 2193 16302 14149 Borrowing of Economic Authorities from NIB ** 50196 51734 51279 50062 51469 521413- NIB Debt (Net) 351205 166201 189180 200754 222205 238179 NIB Debt 354962 169152 193071 205560 227715 240851 Deposits of the NIB with the banking system (-) 3757 2951 3891 4806 5510 26724- NIB Intradebt 198906 57965 59807 60039 65133 67668 Government debt to the NIB (investments in government securities) 6088 6231 8528 9977 13664 15527 Government borrowing from NIB 142622 0 0 0 0 0 Loans of economic authorities to NIB 50196 51734 51279 50062 51469 52141 Source: Central Bank of Egypt - Ministry of Finance - National Investment Bank.* ( Holdings of resident financial institutions in Egypt represented in the banking system and the insurance sector ).** Apart from the interest payments due to the NIB.x As of 1/7/2006, the government debt to the NIB was cleared to zero, and the Banks obligations to insurance and pension funds were transferred into obligations on the government. Moreover, bonds were issued against the government debt to the Bank at an initial value of LE 197.7 billion.
(3/2) NIB Resources and Uses ( LE mn ) End of June 2006 2007 2008 2009 2010 2011Liabilities :of which 354962 169152 193071 205560 227715 240851 Central Bank of Egypt - Annual Report 2010/2011Social Insurance Fund for Gov. Employees 135735 27428 29076 29638 31613 32982Social Insurance Fund for Pub. & Priv. Business Sector Employees 105703 20574 22632 24895 27384 29663Proceeds from investment certificates 64038 68485 79232 81454 91134 94635Accumulated interest on investment certificates (category A) 7028 7579 7509 8654 8648 8747Proceeds from US dollar development bonds 824 483 152 11 10 9Post office savings 39097 43518 49255 54487 64837 71978Others* 2537 1085 5215 6421 4089 2837Assets :of which 354962 169152 193071 205560 227715 240851Loans to government 142622 0 0 0 0 0Loans to economic authorities 50196 51734 51279 50062 51469 52141Investments in government securities (bills and bonds) 6088 6231 8528 9977 13664 15527Deposits of the NIB with the banking system 3757 2951 3891 4806 5510 2672Lending for equity participations in holding Companies and affiliated entities,concessional loans, and others (NIB debt minus its intradebt) 152299 108236 129373 140715 157072 170511 107Source : Central Bank of Egypt - National Investment Bank.* Including deposits of the private insurance funds, saving certificates, and loans & deposits of various authorities.
Central Bank of Egypt - Annual Report 2010/2011 108 (3/3) External Debt (US$ mn) End of June 2005 2006 2007 2008 2009 2010 2011 +Total External Debt* 28948.8 29592.6 29898.0 33892.8 31531.1 33694.2 34905.7Rescheduled bilateral debt ** 15734.1 15229.0 14846.5 15606.4 14081.4 12599.3 12860.6 ODA 7836.4 7610.6 7396.5 7787.8 7448.0 7054.6 7271.6 Non-ODA 7897.7 7618.4 7450.0 7818.6 6633.4 5544.7 5589.0Other bilateral debt 4291.3 4295.5 4346.0 4972.1 4824.2 4692.4 5214.5 Paris Club countries 3529.9 3590.4 3630.1 4130.4 3978.3 3774.7 4211.3 Other countries 761.4 705.1 715.9 841.7 845.9 917.7 1003.2International & regional institutions 5058.2 5205.0 6815.2 7361.5 8168.8 9977.5 10808.6Suppliers & buyers credits 781.6 979.5 791.6 763.5 323.6 313.5 426.0Eُ gyptian bonds & notes 613.6 1861.9 1570.3 2651.8 1926.1 3079.5 2821.0Long-term deposit *** 500.0 300.0 0.0 0.0 0.0 0.0 0.0Private sector debt (non-guaranteed) 115.2 88.7 78.9 18.2 83.0 77.2 17.5Short-term debt 1854.8 1633.0 1449.5 2519.3 2124.0 2954.8 2757.5 Deposits 819.3 633.1 536.0 1048.3 1156.1 1359.5 972.7 Other facilities 1035.5 999.9 913.5 1471.0 967.9 1595.3 1784.8Source:Loans & External Debt Department - CBE.+ Provisional* The difference from World Bank Data is in short-term debt .** According to the agreement signed with Paris Club countries on May 25, 1991.*** As of December 2004, the deposit of the Arab International Bank was transferred from short-term debt to long-term deposits
(3/4) Distribution of External Debt by Main Currency (US$ mn) End of June 2010 2011 * Change Value % Value % (-)Total 33694.2 100.0 34905.9 100.0 1211.7 Central Bank of Egypt - Annual Report 2010/2011US dollar ** 14493.2 43.0 13731.9 39.4 (761.3)Canadian dollar 144.0 0.4 145.1 0.4 1.1Australian dollar 107.0 0.3 117.5 0.3 10.5Swiss franc 509.0 1.5 618.7 1.8 109.7Sterling pound 215.0 0.6 203.4 0.6 (11.6)Japanese yen 4212.0 12.5 4480.4 12.8 268.4Danish krone 112.0 0.3 121.7 0.3 9.7Norwegian krone 4.0 0.0 5.1 0.0 1.1Swedish krona 26.0 0.1 28.1 0.1 2.1Kuwaiti dinar 1973.0 5.9 2111.6 6.1 138.6Saudi riyal 33.0 0.1 43.6 0.1 10.6UAE dirham 30.0 0.1 30.4 0.1 0.4Euro 8835.0 26.2 10064.0 28.8 1229.0Egyptain Pound 722.0 2.2 605.7 1.7 (116.3)SDRs 2279.0 6.8 2598.7 7.5 319.7Source: Loans & External Debt Department- CBE* Provisional. 109** Including other due liabilities in US Dollar.
110Central Bank of Egypt - Annual Report 2010/2011 (4/1) Structure of the Egyptian Banking System End of Number of Banks Operating in Egypt Number of Branches June 2005 52 2841 June 2006 43 2944 June 2007 41 3056 June 2008 39 3297 June 2009 39 3443 June 2010 39 3502 June 2011 39 3573Source : Central Bank of Egypt.
111 Central Bank of Egypt - Annual Report 2010/2011 (4/2) Representation Offices of Foreign Banks in Egypt Registered with the CBE (on June 30, 2011) Registration Name Address DateAl-Raghi Banking & Investment Corporation 20/10/1993 19 Adly St.,2nd Floor , Apart. 59, Cairo.Bank of New York Mellon 27/10/1993 9 Abd El- Moneim Riad St., Dokki, Giza.Commerz Bank AG. 31/05/1994 Building No. 2401 B, 1st Floor, Smart Village, Cairo-Alex. Highway (28 Km).Monte dei Paschi di Siena S.P.A. 05/07/1994 10 Sarai EL- Gezeera St.,2nd Floor, Flat No. 5, Zamalek 11211,Cairo.Union De Banques Arabes et Francaises (UBAF) 15/08/1994 4 Behlar Passage, Kasr El-Nil St., Cairo.State Bank of India 03/10/1994 15 Kamel El-Shinnawy St., Garden City, Cairo.Deutsche Bank AG. 10/11/1994 6 Polis Hanna St., Dokki, Giza.Intesa SanPaolo Spa. 13/03/1995 3 Abo Elfeda St., Zamalek, Cairo.Arab Islamic Bank 11/12/1995 21, 23 Giza St., El-Nil Tower, Giza.JP Morgan Chase Bank N.A. 05/08/1996 3 Ahmed Nessim St., Giza.Bank of Tokyo Mitsubishi UFJ Ltd. 04/03/1997 Nile City Towers, South Tower, 10th Floor/C, Corniche El-Nil, Cairo.UBS AG. 22/10/1997 International Trade Building, 1191 Corniche El-Nil St., 13th Floor, Cairo.Credit Suisse AG. 16/03/1998 Nile City Towers, North Tower, Ramlah Boulak.Wells Fargo Bank, National Association 06/05/1998 9 El-Gomhoria El-Motahida Square, Dokki.ING Bank N.V. 12/07/1999 9 Houd El-Laban St.,Garden City, Cairo.Credit Industriel et Commercial, CIC. 22/07/1999 28 Sherif St., Cairo.B.H.F Bank AG. 02/08/1999 8 El-Sadd El-Aley St., Dokki, 12311,Giza.Royal Bank Of Scotland (RBS) 17/11/1999 31 Gezirat El-Arab St., Mohandeseen, Giza.Natixis 22/03/2000 El-Kamel Building, 54/B, Banks Zone, 6th of Oct.Den Norske Bank 27/05/2001 19 El-Gabalaya St., Zamalek.Bank of Valleta Plc. 10/07/2003 7 EL-Thawra Square, Dokki, 7th Floor, Flat No.71.Sumitomo Mitsui Banking Corporation 19/01/2004 3 Ibn Kassir, Corniche El-Nil St., 14th Floor, Flat No. 6, Giza.Clariden Leu Ltd. 22/04/2004 4 A Hassan Sabri St., 12th Floor, Flat No. 82, Zamalek, 11211, Cairo. Sheikha Fatma St., City Stars Towers, Star Capital (2), Office No. 21-22, Misr El-Standard Chartered Bank 12/09/2005 Gadedah, Cairo. thEgyptian Sudanese Bank 28/05/2008 4 Ahmed Basha St., 16 Floor, Garden City, Cairo.China Development Bank 02/11/2009 41 Eighteen St. (Units 1, 2), Maadi, Cairo.Türkiye İş Bankasi, A.Ş. 31/03/2010 Nile City Towers, North Tower, 27th Floor, Corniche El-Nil, Cairo.Source : Central Bank of Egypt.
Central Bank of Egypt - Annual Report 2010/2011 112 (5/1) Banks : Aggregate Financial Position ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Assets Cash 6594 6813 7705 10261 11128 12448 14830 Securities & investments in TBs, of which: 170659 193965 176098 201858 332597 405895 474176 CBE notes - 21563 17617 - - - - Balances with banks in Egypt; of which: 124986 121695 217363 278185 173482 200719 117010 Lending and discount balances NA 413 946 1307 775 729 885 Balances with banks abroad; of which: 51204 72554 124366 122792 77120 57371 96080 Lending and discount balances NA 1273 2836 2448 1869 2004 1398 Clients Loan and discount balances 308195 324041 353746 401425 429957 465990 474139 Other assets 41990 42494 58645 68790 67709 78232 93455Assets = Liabilities 703628 761562 937923 1083311 1091993 1220655 1269690Liabilities Capital 22949 27112 33037 37576 41550 46598 59049 Reserves 12419 13418 12552 19763 21371 28486 22056 Provisions 49541 54950 53469 62314 69748 70418 55106 Bonds & long-term loans 14254 17526 26351 22285 22045 21697 26180 Obligations to banks in Egypt 22671 21488 82619 98699 31004 53881 28171 Obligations to banks abroad 12262 8770 10006 13327 18195 20305 15168 Total deposits 519649 568841 649953 747199 809694 892492 957037 Other liabilities; of which: 49883 49457 69936 82148 78386 86778 106923 Payable cheques 2683 2973 5801 4450 3576 4764 5143Source : Central Bank of Egypt.
(5/2) Banks : Deposits by Maturity ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total Deposits 519649 568841 649953 747199 809694 892492 957037 Demand deposits 51557 62431 78759 100569 102853 119518 130087 Time & saving deposits 445132 479805 542982 612737 673048 738650 789407 Blocked or retained deposits 22960 26605 28212 33893 33793 34324 37543 Central Bank of Egypt - Annual Report 2010/2011First : In Local Currency 369067 401143 463320 552079 598587 686052 724878 Demand deposits 31606 41793 50366 71971 69262 84152 86967 Time & saving deposits 324664 345953 396351 460285 509156 580020 615839 Blocked or retained deposits 12797 13397 16603 19823 20169 21880 22072Second : In Foreign Currencies 150582 167698 186633 195120 211107 206440 232159 Demand deposits 19951 20638 28393 28598 33591 35366 43120 Time & saving deposits 120468 133852 146631 152452 163892 158630 173568 Blocked or retained deposits 10163 13208 11609 14070 13624 12444 15471Source : Central Bank of Egypt. 113
Central Bank of Egypt - Annual Report 2010/2011 114 (5/3) Banks : Deposits by Sector ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total Deposits 519649 568841 649953 747199 809694 892492 957037In Local Currency 369067 401143 463320 552079 598587 686052 724878 Government sector 57649 49422 37233 44789 49564 58496 56728 Public business sector * 16727 20399 23464 29434 28800 32726 29278 Private business sector 39668 41444 77504 119716 104250 114372 103965 Household sector 253865 287973 321793 354119 413558 477842 532032 External sector ** 1158 1905 3326 4021 2415 2616 2875In Foreign Currencies 150582 167698 186633 195120 211107 206440 232159 Government sector 27252 29290 30329 33203 41481 45618 51403 Public business sector * 4195 5668 6721 9146 8735 6474 7549 Private business sector 31337 39263 49093 57202 58321 54907 60241 Household sector 85813 92174 98331 93653 100210 96875 109248 External sector ** 1985 1303 2159 1916 2360 2566 3718Source : Central Bank of Egypt.* Including all public sector companies subject or not to Law No. 203 for 1991.** Including counterpart deposits of USAID.
(5/4) Banks : Lending and Discount Balances by Sector ( LE mn ) End of June 2005 2006 2007 2008 2009 2010 2011Total 308195 324041 353746 401425 429957 465990 474139In Local Currency 233141 238926 248544 267166 295192 313654 327764 Government sector 10938 11285 10788 9698 12946 15389 18191 Public business sector * 30164 26269 18097 19475 23725 21051 24560 Central Bank of Egypt - Annual Report 2010/2011 Private business sector 152193 150491 163292 167258 177107 185694 187810 Household sector 39354 50158 55453 69838 78827 90266 96112 External sector 492 723 914 897 2587 1254 1091In Foreign Currencies 75054 85115 105202 134259 134765 152336 146375 Government sector 11080 9712 15896 21460 17802 23995 21611 Public business sector * 7078 6373 6091 7177 9155 8761 8128 Private business sector 53502 64184 76020 90829 90778 101454 96945 Household sector 1913 3017 4485 8494 5762 2526 3095 External sector 1481 1829 2710 6299 11268 15600 16596Source : Central Bank of Egypt. 115* Including all public sector companies subject or not to Law No. 203 for 1991.
(6/2) GDP by Expenditure ( At 2006/ 2007 prices ) Value at LE bn Structure % Growth Rate % 2009/2010 2010/2011 2009/2010 2010/2011 2009/2010 2010/2011 Central Bank of Egypt - Annual Report 2010/2011 1-GDP at Market Price(2+5-6) 878.4 894.0 100.0 100.0 5.1 1.82- Total Domestic Expenditure (3+4) 898.3 922.5 102.3 103.2 4.9 2.73- Final Consumption 722.3 754.2 82.2 84.4 4.2 4.4 Final private consumption 627.2 655.5 71.4 73.3 4.1 4.5 Final government consumption 95.1 98.7 10.8 11.0 4.5 3.84- Gross Capital Formation 176.0 168.3 20.1 18.8 8.0 -4.4 Investments 172.5 162.9 19.7 18.2 7.7 -5.6 Change in stock 3.5 5.4 0.4 0.6 .. ..5- Exports of Goods & Services 240.6 251.6 27.4 28.1 -3.0 4.66- Imports of Goods & Services 260.5 280.1 29.7 31.3 -3.2 7.57-Gross Domestic Saving (1-3) 156.1 139.8 17.8 15.6 9.9 -10.4 117Source : Ministry of Planning... Not Available.
Central Bank of Egypt - Annual Report 2010/2011 118 ( 6/3 ) Consumer Price Index (Urban Population) (January 2010=100) * End of Inflation Rate (%) Group Relative June FY Weights 2009 2010 2011 2009/2010 2010/2011All Items 100.0 93.0 102.4 114.5 10.1 11.8 Food & non-alcoholic beverages 39.92 89.3 105.9 126.0 18.6 19.0 Alcoholic beverages, tobacco & narcotics 2.19 100.0 100.0 169.9 0.0 69.9 Clothing & footwear 5.41 99.4 100.0 102.2 0.6 2.2 Housing, water, electricity, gas & other fuel 18.37 96.5 99.3 100.4 2.9 1.1 Furnishings, household equipment & routine maintenance of the house 3.77 99.3 102.6 105.2 3.3 2.5 Health 6.33 99.7 100.0 101.9 0.3 1.9 Transportation 5.68 99.6 100.6 101.7 1.0 1.0 Communications 3.12 100.0 99.9 100.0 -0.2 0.1 Recreation & culture 2.43 99.5 102.4 108.4 2.9 5.9 Education 4.63 91.4 100.0 124.3 9.4 24.3 Restaurants, cafes and hotels 4.43 95.9 100.2 112.4 4.5 12.1 Miscellaneous goods and services 3.72 86.5 100.7 103.2 16.4 2.4Source: Central Agency for Public Mobilization and Statistics( CAPMAS), (CPI Monthly Bulletin of Consumer Price Index) .* The 9th series of CPI was introduced in August 2010. The weights involved in the formation of the Index were taken from the results of the 2008/2009 survey of income, expenditure and consumption using January 2010 as a base period.
( 6/4 ) Producer Price Index (PPI) (2004/2005 = 100) Inflation Rate (%) End of June Group Relative FY Weights 2009 2010 2011 Central Bank of Egypt - Annual Report 2010/2011 2009/2010 2010/2011All ITEMS 100.0 148.2 160.9 192.1 8.6 19.4 Agriculture, Forestry and Fishing 25.10 188.9 210.9 261.4 11.6 23.9 Mining and Quarrying 21.80 134.6 147.8 201.5 9.8 36.3 Manufacturing 38.90 140.0 149.6 165.0 6.9 10.3 Electricity, Gas, Steam and Air Conditioning Supply 2.30 115.0 140.3 140.3 22.0 0.0 Water Supply, Sewerage,Waste Management and Remediation Activities 2.00 138.7 146.5 146.5 5.6 0.0 Transportation and Storage 2.80 124.2 124.8 127.3 0.5 2.0 Accommodation and Food Service Activities 5.00 114.6 110.6 125.1 -3.5 13.1 Information and Communications 2.10 112.5 112.5 112.5 0.0 0.0Source: Central Agency for Public Mobilization and Statistics (CAPMAS) the PPI Bi-monthly Bulletin. 119
120Central Bank of Egypt - Annual Report 2010/2011 (7/1) Summary of Consolidated Fiscal Operations of General Government ( The Budget sector , NIB & SIFs ) ( LE mn ) Actual During FY 2009/2010 2010/2011 The Budget The Budget The Budget Sector The Budget Sector Sector,NIB & SIFs Sector,NIB & SIFsTotal Revenues 268114 303361 259617 296341 170494 170494 191626 191626Tax Revenues 4332 4332 1723 1723Grants 54570 61618 41803 49436Property Income 17212 17212 15160 15160Sales of Goods and Services 8873 8873 6755 6755Financing Investments 12633 40832 2550 31641OthersTotal Expenditures 365987 396768 392097 430641 85369 86377 95082 96369Compensation of Employees 28059 28244 23785 24283Purchase of Goods and Services 72333 62277 81081 72366Interests 102975 142360 122834 167974Subsidies ,Grants and Social Beneifts 28901 29047 31363 31552Other Expenditures 48350 48463 37952 38097Purchase of Non-Financial Assets (Investments) 97873 93407 132480 134300Cash DeficitNet Acquisition of Financial Assets 165 5479 -2120 -4262Overall Deficit 98038 98886 130360 130038Source : The Ministry of Finance.
121 Central Bank of Egypt - Annual Report 2010/2011 (7/2) Summary of Consolidated Fiscal Operations of General Government ( The Budget sector , NIB & SIFs ) ( LE mn ) Actual During FY 2009/2010 2010/2011 The Budget The Budget The Budget Sector The Budget Sector Sector,NIB & SIFs Sector,NIB & SIFs Financing Sources 98038 98886 130360 130038 Domestic Financing 101492 102415 144149 135560 Banking Financing 40263 39380 99970 97625 CBE 11561 11561 24540 24540 Other Banks 28702 27819 75430 73085 Non- Banking Financing 61229 63035 44179 37935 CBE 3687 0 1227 0 SIFs 5176 0 11071 0 Other 53014 53014 30954 30954 Borrowing from NIB 0 10669 0 6054 Special Accounts for Economic Authorities -648 -648 927 927 Blocked Account Used in Amortizing Part of CBE Bonds 0 0 0 0 Foreign Borrowing 2458 2458 5024 5024 Arrears 0 0 0 0 Others, of which : 347 273 -238 8030 Special Accounts for Budget Entities 0 0 0 0 Financing Effects for Eliminations 0 -1 0 -1 Exchange Rate Revaluation 1328 1328 3945 3945 Net Privatization Proceeds 425 425 22 22 Difference between Treasury Bills Face Value & Present Value -227 -227 -7419 -7419 Foreign Debt Reclassification Diff. and Related FX Diff. 0 0 0 0 Discrepancy -7785 -7785 -15123 -15123Cash deficit (surplus) as a percentage of GDP 8.1% 7.7% 9.6% 9.7%Overall fiscal balance as a percentage of GDP 8.1% 8.2% 9.5% 9.4%Revenues as a percentage of GDP 22.2% 25.1% 18.8% 21.5%Expenditures as a percentage of GDP 30.3% 32.9% 28.5% 31.3%Sourse: Ministry of Finance.
122Central Bank of Egypt - Annual Report 2010/2011 (8/1) Balance of Payments (US$ mn) FY 2009/2010* 2010/2011* Change Value ٪ Value ٪ (-)Balance of Current Account (4317.6) (2768.8) 1548.8Balance of Current Account (Excluding Transfers) (14781.0) (15905.6) (1124.6)Receipts 47436.0 100.0 48865.6 100.0 1429.6 Export proceeds** 23873.1 50.3 26992.5 55.2 3119.4 Transportation, of which 7216.5 15.2 8069.1 16.5 852.6 Suez Canal dues 4516.8 9.5 5052.9 10.3 536.1 Travel 11591.3 24.4 10588.7 21.7 (1002.6) Investment income 829.0 1.8 418.8 0.9 (410.2) Government receipts 217.9 0.5 117.7 0.2 (100.2) Other receipts 3708.2 7.8 2678.8 5.5 (1029.4)Payments 62217.0 100.0 64771.2 100.0 2554.2 Import payments** 48993.1 78.7 50776.5 78.4 1783.4 Transportation 1229.7 2.0 1385.3 2.1 155.6 Travel 2327.5 3.7 2112.6 3.3 (214.9) Investment income, of which 5193.7 8.4 6466.5 10.0 1272.8 Interest paid 553.6 0.9 551.8 0.9 (1.8) Government expenditures 1534.5 2.5 1106.1 1.7 (428.4) Other payments 2938.5 4.7 2924.2 4.5 (14.3)Transfers 10463.4 100.0 13136.8 100.0 2673.4 Private (net) 9509.4 90.9 12383.9 94.3 2874.5 Official (net) 954.0 9.1 752.9 5.7 (201.1)*Preliminary figures.**Including the exports & imports of free zones.
123 Central Bank of Egypt - Annual Report 2010/2011 ( 8/1) Balance of Payments (Contd.) (US$ mn) FY 2009/2010* 2010/2011* Value ValueCapital & Financial Account 8325.4 -4823.5Capital Account -36.2 -32.3Financial Account 8361.6 -4791.2Direct Investment Abroad -976.6 -958.0Direct Investment in Egypt (Net) 6758.2 2188.6Portfolio Investments Abroad -522.2 -117.7Portfolio Investments in Egypt (Net), Of which : 7879.3 -2550.9 Bonds 1357.3 211.0Other Investments -4777.1 -3353.2 Net Borrowing 2350.0 876.0 Medium- and Long-Term Loans -522.8 -1467.8 Drawings 1228.9 485.3 Repayments -1751.7 -1953.1 Medium-Term Suppliers and Buyers Credit -39.7 -48.9 Drawings 51.8 88.7 Repayments -91.5 -137.6 Short -Term Suppliers and Buyers Credit (Net) 2912.5 2392.7 Other Assets -9669.1 -3427.1 CBE -40.7 -64.3 Banks -2073.0 -1608.8 Other -7555.4 -1754.0 Other Liabilities 2542.0 -802.1 CBE 1187.1 -44.0 Banks 1354.9 -758.1Net Errors & Omissions -652.1 -2161.6Overall Balance 3355.7 -9753.9Change in CBE Reserve Assets, Increase (-) -3355.7 9753.9Source: CBE.* Preliminary figures.
124Central Bank of Egypt - Annual Report 2010/2011 (8/2) Average Exchange Rates (In piasters per foreign currency unit)End of June 2010 June 2011First: US dollar Interbank RateMinimum 569.40 596.70Maximum 569.70 597.10Weighted average 569.52 596.90Second: Market Rates Buy Sell Buy SellUS Dollar 568.07 570.96 595.58 598.49Euro 697.53 701.48 861.15 865.41Pound Sterling 853.02 857.64 953.70 958.54Swiss Franc 525.31 528.28 713.18 716.84100 Japanese Yen 640.44 643.77 740.58 744.57Saudi Riyal 151.46 152.24 158.81 159.60Kuwaiti Dinar 1948.12 1966.12 2161.81 2176.32UAE Dirham 154.63 155.48 162.12 162.96Chinese Yuan 83.76 84.19 92.14 92.59Source : CBEThe interbank Rates started at 23/12/2004
(9/1) Trading in Shares on the Egyptian Exchange During FY 2009/2010 2010/2011 Number of Number of Amount Market Value Amount Market Value Transactions Transactions (Thousand) (mn) (Thousand) (mn) Central Bank of Egypt - Annual Report 2010/2011 (Unit) (Unit)In Egyptian Pound 11788386 31752703 372693 7003133 22568747 146656 Floor Transactions 11062889 24336192 253432 6921524 20465398 132939 Over the Counter Trading 725497 7416511 119261 81609 2103349 13717Foreign Currencies (US Dollar) 326727 1077180 3593 147376 599556 1423 Floor Transactions 318742 979575 1959 145282 537349 830 Over the Counter Trading 7985 97605 1634 2094 62207 593Foreign Currencies (Euro) 26 3388 88 9 265 36 Floor Transactions 0 0 0 0 0 0 Over the Counter Trading 26 3388 88 9 265 36 125Source : Egyptian Financial Supervisory Authority (EFSA), Capital Market Monthly Report.
Central Bank of Egypt - Annual Report 2010/2011 126 (9/2) Trading in Bonds on the Egyptian Exchange During FY 2009/2010 2010/2011 Number of Number of Amount Market Value Amount Market Value Transactions Transactions (Unit) (Thousand) (Unit) (Thousand) In Egyptian Pound 1218 46492990 47889797 1558 45139785 45114731 Floor Transactions 1218 46492990 47889797 1558 45139785 45114731 Over the Counter Trading 0 0 0 0 0 0 In US Dollar 0 0 0 0 0 0 Floor Transactions 0 0 0 0 0 0 Over the Counter Trading 0 0 0 0 0 0Source : Egyptian Financial Supervisory Authority (EFSA), Capital Market Monthly Report.
(9/3) Foreigners Transactions on the Egyptian Exchange During FY 2009/2010 2010/2011 Egyptian Pound US Dollar Egyptian Pound US Dollar Central Bank of Egypt - Annual Report 2010/2011Net Number of Transactions (Unit) 131934 6747 57000 3731 Purchases 1055605 47196 870112 32561 Sales 923671 40449 813112 28830Net Volume of Securities (mn) 346 30 42 7 Purchases 4241 243 3726 123 Sales 3895 213 3684 116Net Value of Securities (mn) 5004 106 2070 -15 Purchases 64421 580 44104 217 Sales 59417 474 42034 232 127Source : Egyptian Financial Supervisory Authority (EFSA), Capital Market Monthly Report.
Periodical Publications of the Central Bank of Egypt Name of Publication Language Periodicity 1 -Monthly Statistical Bulletin Arabic and English Monthly 2 -Economic Review Arabic and English Quarterly 3 -Annual Report Arabic and English Every fiscal year 4 -External Position of the English Quarterly Egyptian EconomyNotes: - All publications of the Central Bank of Egypt are available on the CBEs website : www.cbe.org.eg - To obtain a hard copy of any publication by mail, please write to the following address: Statistics and Economic Reports, the Central Bank of Egypt, 54 El Gomhoreya St., Cairo, Egypt.