annual report2011 cbe

Central Bank of Egypt

Annual Report

2010/2011

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 Anwar

Mr. 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. The Report sheds light on the major domestic economic developments, especially economic growth, inflation, the state budget, the balance of payments, and foreign trade, besides reviewing the CBE's activities and the main monetary, credit and banking developments.

On the domestic arena, the central event that marked FY 2010/2011 was the

outbreak of the 25 January Revolution and the Arab spring revolutions, which aspired to change the political landscape and better the economic, social and political conditions of the region, after the transition periods elapse and their aftereffects are subdued. As far as Egypt is concerned, the major challenge is security instability which cast its dark shadows on tourism, travel, and investment, and drove down employment and production rates in a large number of factories. Unfortunately, such repercussions coincided with the fallout of the turmoil in the neighboring Arab countries, the credit crisis of the euro area, and the adverse world economic developments. In this setting, real GDP growth (at factor cost) slowed to 1.9 percent from 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 a negative 3.8 percent (against a positive 5.6 percent), and a negative 4.2 percent at constant prices (against a positive 5.4 percent) due to the spillovers of the Revolution in this transitional period.

The decisions of the Monetary Policy Committee (MPC) during FY

2010/2011 continued to be supportive of economic growth, and in line with the overriding objective of the monetary policy (price stability). The MPC’s decisions were tuned to this objective, keeping the overnight lending and deposit rates broadly unchanged at 8.25 percent and 9.75 percent, respectively, and the discount rate at 8.5 percent in its eight meetings held during the reporting year. These rates remained in effect at the time of preparing the report and just before the meeting held on 24 November 2011, where the MPC raised the lending rate by 100 basis points to 9.25 percent, the overnight lending rate by 50 basis points to 10.25 percent, and the discount rate by 100 points to 9.50 percent. In March 2011, the MPC launched regular repurchasing agreements (repos), to pump the necessary funds to banks that are likely to face liquidity pressures. These operations bore an interest rate of 9.25 percent, which remained applicable until 24 November 2011, where it was increased by 50 basis points to 9.75 percent.

Prompted by a resolute commitment to the banking reform program, the

CBE launched the second phase, after the success of the first phase that proved effective in cushioning banks against the risks posed by spillovers from the global financial crisis. In the reporting year; specifically at the time of the Revolution and in its aftermath, the CBE responded with a number of decisions to regulate the banking

B Central Bank of Egypt – Annual Report 2010/2011 activity and strengthen supervision over transfers abroad. Moreover, banks were required to open accounts for donations from the country's stakeholders for social responsibility projects (the Report will tackle this in further detail).

In the context of applying governance rules as one of the targets of the second

phase 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, banks registered at the CBE are required to comply to the regulation by maximum 1 March 2012 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 on

8 Oct., 2011, amending certain provisions of Law No. 88 of 2003 of the Central Bank, Banking Sector and Money, to enforce governance rules and prevent any conflict of interests pertaining to the CBE's Board of Directors. Accordingly, a new board was formed to replace the former that served its term by end of November 2011. The new board comprised 9 members, instead of 15 (the CBE Governor and his two deputy governors, a representative of the Ministry of Finance, the Chairman of the Egyptian Financial Supervisory Authority; and four members with expertise in financial, economic, and legal matters).

The aggregate financial position of banks (39 in number) reached LE 1.3

trillion as at the end of June 2011, with total equity of LE 81.1 billion, deposits of LE 957.0 billion, and investments in securities and bills of LE 474.2 billion. As for financial soundness indicators, the capital adequacy ratio (capital/risk-weighted assets) reached approximately 16.0 percent as at the end of June 2011, against a minimum requirement of 10 percent. Profitability indicators showed an improvement 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 the financing needs of clients is a prerequisite for fostering confidence in that market, all the more so during the Revolution and at its aftermath, the CBE has kept up its effective and balanced management of the forex market, through the dollar interbank system, to safeguard the market against any drastic volatility, especially after the noticeable decline in foreign investments (direct and indirect) and the dramatic fall in tourism revenues amidst the political unrest in Egypt. The weighted average of the US 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 LE value 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 period is not covered by the report).

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Net international reserves (NIR) at the CBE were adversely influenced by the events that the country witnessed in the second half of the reporting year. NIR receded by US$ 8.6 billion or 24.6 percent in the year of the report, ending the year at US$ 26.6 billion (against US$ 36.0 billion at end of Dec. 2010 and US$ 35.2 billion at 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 the country. Tourism receipts plummeted by 47.5 percent in the second half of the FY as compared with the first half, and for the first time, the FDI recorded a negative figure of US$ 65 million, and portfolio investments revealed a net outflow of US$ 7.1 billion. The drain on NIR continued at the time of preparing the report, pushing them down 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 second half of the FY (January/June 2011), the BOP ran an overall deficit of US$ 10.3 billion (against an overall surplus of US$ 571.7 million in the first half), on the back of the Arab spring events in Egypt and the Arab region. The overall deficit in the reporting year reflected the current account deficit that narrowed by 35.9 percent to US$ 2.8 billion (against US$ 4.3 billion in the year of comparison), along with the net outflows of US$ 4.8 billion of the capital and financial account (against net inflows of US$ 8.3 billion). While the report is being prepared, the BOP registered an overall deficit of US$ 2.4 billion in July/Sept. 2011/2012 (contrasted to an overall surplus of US$ 14.7 million in July/Sept. 2010/2011).

Finally, I seize this opportunity to thank and pay tribute to the former members of the CBE Board of Directors for their sincere efforts, noting that their term of office came 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 banking system for their efforts that enabled the banking system to continue performing its role under the umbrella of development and modernization. May God help us serve our 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-I

Chapter 1

Central Bank of Egypt

1/1 Monetary Policy 1 1/2 Reserve Money 3 1/3 Payment Systems and Information Technology (IT) 6 1/4 Domestic Liquidity and Counterpart Assets 10 1/5 Supervision Sector 14 1/6 Banking Sector Reform 20 1/7 Management of the Foreign Exchange Market and International

Reserves

23

1/8 Domestic and External Public Debt 24 1/9 Human Resources Development (HRD) 36 Chapter 2

Banking Developments

2/1 Financial Position 41 2/2 Deposits 44 2/3 Lending Activity 45 2/4 Cash Flows at Banks 47 2/5 Bank Performance Indicators 49 Chapter 3

Macroeconomic Developments

3/1 Gross Domestic Product (GDP) 53 3/2 Inflation 59 3/3 Consolidated Fiscal Operations of the General Government 64 3/4 Balance of Payments and External Trade 68 3/5 Non-Banking Financial Services Sector 89

Annex

Statistical Section 95

A


Main Indicators of the Performance of Egyptian Economic Sectors

Fiscal Year 2009/10 2010/11

Real Sector Real GDP growth rate at factor cost (%), 5.1 1.9 of which :

The share of the private sector (percentage) 4.0 0.8 Real GDP growth rate at market and constant prices (%), of which:

5.1 1.8

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 -1.0

CPI inflation (urban) July/June (%) 10.1 11.8 8.6 19.4 PPI inflation, July/June (%)

Financial & Monetary Sector Domestic liquidity growth rate M2 (%) 10.4 10.0 Growth rate of time & saving deposits in local currency (%) 13.4 7.0 Growth rate of foreign currency deposits (%) (5.4) 11.9 Foreign currency deposits/ Total deposits (dollarization rate) (%) 20.2 21.0 Private business sector credit/ Total credit (%) 42.1 36.2 Net claims on the government /Total credit (%) 42.0 49.0 Household sector credit/ Total credit (%) 12.0 11.1 Public business sector credit/ Total credit (%) 3.9 3.7 Change in private business sector credit/Change in total credit (%) 27.4 (2.7) Change in net claims on the government/Change in total credit (%) 66.3 94.6

B Central Bank of Egypt – Annual Report 2010/2011

Main Indicators of the Performance of Egyptian Economic Sectors (contd.)

Fiscal Year 2009/10 2010/11 Change in household sector credit/ Change in total credit (%) 10.3 5.5 Change in public business sector credit/ Change in total credit (%) (4.0) 2.6 Net international reserves (US$ mn) at end of the period 35221 26564 NIR in months of merchandise imports 8.6 6.3 Banks’ 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

14.3

External Sector Trade Balance/GDP (%) (11.5) (10.1) Service Balance/ GDP (%) 4.7 3.3 FDI in Egypt (net)/GDP (%) 3.1 0.9 Net transfers/ GDP (%)

4.8

5.6

External Debt External debt/ GDP (%) 15.9 15.2 Short-term external debt/Total external debt 8.8 7.9 External debt service/Exports of goods and services (%)

5.5

5.7

Budget Sector Expenditure/GDP (%) 30.3 28.5 Revenues/GDP (%) 22.2 18.8 Total wages/Total public revenues (%) 31.8 36.6 Primary deficit**/GDP (%) 2.1 3.7 Overall deficit/GDP (%) 8.1 9.5 Gross 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.

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Executive Summary

The Annual Report for FY 2010/2011 highlights major international economic developments and the CBE’s activity, along with the main monetary, credit and banking developments. Also, the Report sheds light on the key domestic economic developments, including economic growth, inflation, the state budget, balance of payments and external trade.

In FY 2010/11, real GDP growth at factor cost slowed to 1.9 percent (from

5.1 percent a year earlier) and to 1.8 percent (from 5.1 percent) at market and constant prices. The sectors that primarily underperformed were the manufacturing, construction and building, finance, and communications and information. The slowdown was intense in the third quarter (Jan./March 2011) in which real GDP growth at factor cost slackened to a negative 3.8 percent (down from a positive 5.6 percent) and to a negative 4.2 percent (from a positive 5.4 percent) at market and constant prices. This is traced to the events of the January 25th Revolution, and the resultant disruption and instability of most economic sectors. However, GDP growth increased in the last quarter of the year, recording a positive 0.3 percent at factor cost and 0.4 percent at constant and market prices. The recovery was led by the better performance of some sectors, especially agriculture and irrigation; transportation and storage; wholesale and retail trade; and real estate activities.

Implemented investments at current prices fell by 1.2 percent (against a rise

of 17.6 percent in the year of comparison), to reach LE 229.0 billion. The decline was mainly 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), to register LE 146.6 billion or 64.0 percent of total investments in the reporting year. The rise in the private sector's 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 of financial 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 a regular basis under the operational framework of the CBE monetary policy, with a maturity of one week and an interest rate to be set by the MPC in each meeting. The aim is to provide adequate liquidity for banks that may face potential pressures on their liquidity position. The Committee set an interest rate of 9.25 percent per annum on repos, and the rate remained in effect till the end of June 2011. At the time of preparing 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 MPC increased the 7-day repos by 50 bps to 9.75 percent.

D Central Bank of Egypt – Annual Report 2010/2011

Reserve money reached LE 251.0 billion at end of June 2011, up by LE 47.9 billion or 23.6 percent during FY 2010/11, well above the LE 28.0 billion and 16 percent of the preceding FY. Noticeably, 68 percent of the increase took place in the second half of the year (Jan./June 2011). The bulk of the increase (roughly 80 percent) was in the currency in circulation outside the CBE, to meet the withdrawals from deposit and client accounts during, and in the aftermath of, the Egyptian revolution.

Domestic liquidity went up by LE 91.9 billion or 10.0 percent (as compared to

LE 86.2 billion and 10.4 percent in the preceding FY) ending the year at LE 1009.4 billion. The rise in domestic liquidity was reflected in the growth of money supply and quasi money. Money supply scaled up by LE 34.7 billion or 16.2 percent and quasi money by LE 57.2 billion or 8.1 percent. The pickup in quasi money was an outcome of the rise in LE time and saving deposits by LE 38.4 billion or 7.0 percent and in foreign currency deposits by LE 18.8 billion worth or 11.9 percent. Given these 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 2010 and from 19.0 percent at end of Dec.). While this indicates a partial shift to foreign currency savings, especially in the second half of the reporting year, time and saving deposits in LE continued to represent the bulk of banking deposits (69.4 percent) at end of June 2011.

Out of its commitment to the banking reform program, launched in

September 2004, the CBE is currently executing the second phase of the program (2009-2011). The main pillars of this phase are: preparing and implementing a comprehensive program for the financial and managerial restructuring of specialized state-owned banks; following up - on a periodic basis - the results of the first phase of the 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 reform program had already borne fruit and positively affected their performance levels; and fulfilling all requirements for upgrading the efficiency of these banks in financial intermediation and risk management. The second phase aims also at applying Basel II standards in Egyptian banks to enhance their risk management practices. The CBE's strategy for the implementation of Basel II framework is based on two main principles, namely simplicity and communication with banks, to ensure banks’ compliance with these standards. The strategy will be phased in over four stages. The second phase of the reform program also aims at adopting an initiative promoting the development and growth of banking services and access to finance especially for small- and medium-sized enterprises (SMEs), as well as reviewing and strictly applying the international governance rules of banks.

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In this respect, the CBE exempted banks' deposits - equivalent to the amount of loans extended thereby to finance SMEs - from the reserve requirement ratio (14 percent). On the other hand, the CBE approved bank governance rules, which aim at helping banks set/develop their governance systems. As such, each bank shall apply these rules in accordance with the volume and complexity of its activities, and strategy, as well as capacity for risk management. Banks were also given a grace period till the 1st of March 2012 to put these rules into effect.

The second phase of the banking reform program has proceeded, after the first

phase was successfully implemented, where some voluntary and state-forced mergers took place, decreasing the number of banks operating in Egypt from 57 at end of December 2004 to 39 banks at end of Dec. 2008, and till the end of the reporting year. Also, during the first phase of the program, state-owned banks were restructured, and the problem of non-performing loans was addressed, as more than 90 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’s Supervision Sector was upgraded.

Due to the exceptional circumstances that Egypt has gone through since the

beginning of the year, a number of decisions and measures were taken by the CBE to regulate banking business and minimize potential risks. Salient of these decisions were setting limits on transfers abroad and cash withdrawals by individuals. Banks were also requested to submit weekly statements on loan balances, client deposits, the local and foreign currency liquidity ratios; and daily statements on cash withdrawals and 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 Board of Directors’ decision regarding regulations for the limits of the concentrations in local banks' investments with countries and financial groups and institutions abroad. Furthermore, a plan was set to review the outstanding credit facilities of all customers and their guarantees, given that the position of each customer shall be studied on a case-by-case basis, taking into consideration the effect of the current crisis on customers’ solvency and the quality of credit extended.

As for the tourism sector in particular, a six-month grace period (from Jan. to June 2011) was extended for the installment payments due on customers thereof, to subdue the negative effects on this sector. In addition, delay interest on deferred installments 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 at their branches to raise donations for scientific projects and the eradication of squatter areas.

F Central 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 4.0 percent. Deposits at banks grew by LE 64.5 billion or 7.2 percent (against LE 82.8 billion or 10.2 percent during the preceding FY), reaching LE 957.0 billion and constituting 75.4 percent of the aggregate financial position of banks at end of June 2011. 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. Banks' investments 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 474.2 billion at end of June 2011.

The CBE issued the financial soundness indicators (FSIs) of the banking

system (i.e., capital adequacy, profitability, liquidity and asset quality). A follow-up of 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 CBE

kept upgrading these systems to bolster the soundness and stability of the financial system, reduce credit risks, expedite payment settlements, and ensure their reliability and confidentiality. Such efforts virtually supported the financial stability in Egypt, especially during the revolution. The Report tackles – in some detail – the main measures that have been taken in this area.

G


Attesting to the CBE's successful management of the foreign exchange

market through the dollar interbank system, the market - which proved resilient to the repercussions of the global financial crisis- has gone another tough test, and again it proved its robustness. The market managed to prudently and efficiently address the crisis it had encountered in the wake of the events of the revolution, which was associated with a noticeable reduction in the volume of foreign investments in the second half of the reporting year. Such a prudent management proved effective in protecting the Egyptian pound from sharp fluctuations. The weighted average of the US dollar in the interbank market posted LE 5.9690 at end of June 2011 (against LE 5.8496 at end of January) with a decline of only 2.0 percent, lower than predicted by international institutions. Later, the rate registered LE 6.0319 per dollar at end of Dec. 2011. This ascertains investors' and dealers' confidence in the efficiency of the foreign exchange system, a fact that is conducive to a stable and orderly trading market, free from turmoil or fears. The profound confidence in the forex market also helps cushion the negative effects of the crisis on the Egyptian economy and strengthen the ability of the economy to recover. Overall, reviewing FY 2010/2011 as a whole tells us that the rate of decline in the value of the Egyptian pound was all in all 4.6 percent.

Amid the extraordinary events witnessed in the second half of the year, net

international 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 and US$ 35.2 billion at end of June 2010 (the decline in Jan./June 2011 was by about US$ 9.4 billion or 26.2 percent). Withdrawals from NIRs were mainly to make up for the departure of many foreign investors from the market in the second half of the year. Notwithstanding their contraction, NIRs covered 6.3 months of merchandise imports at end of June 2011. At the time of preparing this Report, NIRs continued to decline further, standing at US$ 18.1 billion at end of December, thereby covering 3.7 months.

In FY 2010/2011, Q3 (Jan./March), the Egyptian Exchange was closed from

28 January to 22 March 2011 (38 consecutive trading sessions) amid the unprecedented events attending the January 25th Revolution and the months that followed. Trading over the counter was also suspended till 28 March, following the sharp 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. On the first day of resuming trading (23 March), the index plunged by 23.5 percent (as compared with its pre-revolution level), recording the third sharpest daily fall since its launch on 2 Feb. 2003. The fall due to large sales of investors amidst growing concerns of larger losses. On its part, the EGX undertook a number of exceptional measures to bolster investors' confidence (Egyptians and foreigners alike) in the market.

H Central 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 June 2010), owing to the political unrest associated with the January 25th revolution. However, EGX 70 (index of small - and medium-sized enterprises) moved up by 19.3 percent to register 629.6 points, and so did EGX 100 by 7.1 percent to 972.9 points at end of June 2011.

As regards public finance, the FY 2010/11 witnessed an increase of 7.1

percent in total expenditures, and a decrease of 3.2 percent in total revenues, affected by the events and repercussions of the revolution. The overall deficit reached some LE 130.4 billion, up by 33.0 percent compared with the previous FY, thus exceeding the estimated figure for the year by 19.5 percent.

To address the consequences of the current events, the government took a

number of measures. The most important of which were (i) establishing an additional budget appropriation of LE 10.0 billion to meet the basic requirements of subsidizing food commodities in the subject year, (ii) establishing a compensation fund for individuals and small and micro enterprises affected by these events, (iii) appointing, on a permanent basis, some of the temporary-contract employees, (iv) raising the number of beneficiary families of the social solidarity pension, (v) disbursing exceptional pensions and compensations to the families of the revolution's martyrs, and (vi) exempting those with overdue insurance premiums from paying delay fines.

According to the preliminary actual data of the consolidated fiscal operations

of the general government (administrative system - local administration - service authorities) in FY 2010/11, total revenues reached LE 259.6 billion and total expenditures LE 392.1 billion. Against this background, the cash deficit amounted to LE 132.5 billion or 9.6 percent of GDP during the year. By adding the net acquisition of financial assets (LE -2.1 billion) to that cash deficit, the overall deficit would post LE 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 the overall deficit, while an amount of only LE 5.0 billion was provided from external sources.

Domestic public debt reached LE 1044.9 billion at end of June 2011(76.2

percent of GDP). It consists of the sum of net government debt, public economic authorities' debt and that of the National Investment Bank (minus intra-debts of public economic authorities and the government to NIB).

Moving to external transactions, the balance of payments ran an overall

deficit of US$ 9.8 billion, constituting 4.1 percent of GDP (against an overall surplus of US$ 3.4 billion and 1.5 percent of GDP a year earlier).

I


The current account deficit narrowed by 35.9 percent, to US$ 2.8 billion or 1.2 percent of GDP (against US$ 4.3 billion a year earlier). The decline came on the back of a 5.3 percent retreat in the trade deficit to stand at US$ 23.8 billion, and a 25.6 percent increase in net unrequited transfers, on the one hand, and a 23.8 percent decrease in services surplus, on the other hand. Capital and financial transactions with the external world unfolded a net outflow of US$ 4.8 billion (against a net inflow of US$ 8.3 billion), as data shows a reversal in portfolio investments from a net inflow of US$ 7.9 billion, to a net outflow of US$ 2.6 billion. FDI (net basis) in Egypt rolled back by 67.6 percent, registering US$ 2.2 billion (against US$ 6.8 billion).

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 June 2011, as compared with the end of June 2010. The increase was ascribed to the appreciation of most currencies of borrowing versus the US dollar by an amount equivalent to US$ 2.4 billion; the retreat in the balances of Egyptian government bonds and notes issued in international markets (as part of those bonds and notes has been purchased by resident entities at a value of US$ 242.0 million); and to net repayments 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


Chapter 1 Central Bank of Egypt

1/1- Monetary Policy Embracing price stability as the ultimate objective of the monetary policy, the CBE seeks to bring inflation to an appropriate and stable level that helps build confidence and sustain appropriate levels of investment and achieve the targeted economic growth. The CBE adopted the overnight interbank interest rate as the operational target of 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, and the floor is the overnight deposit interest rate at the bank. The decisions taken by the MPC in the eight periodic meetings held in FY 2010/2011 were responsive to the changes in inflation and the Committee's assessment of inflationary pressures. In these meetings, the MPC decided to keep the CBE key interest rates (the overnight deposit and lending rates) and the discount rate unchanged at 8.25 percent, 9.75 percent and 8.50 percent per annum, in order. These rates were kept applicable at the time of preparing this Report and till the meeting of the Committee on November 24, 2011. In that meeting, the overnight deposit rate was raised by 100 bps to 9.25 percent and the overnight lending rate by 50 bps to 10.25 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, which influenced 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 on 10 March, 2011) decided to launch weekly repo operations on a regular basis under the operational framework of the CBE monetary policy, to provide adequate liquidity for banking system units that may face potential liquidity pressures. The MPC assigned a maturity of one week for these operations and an interest rate to be set by the Committee in each meeting. The interest rate on these operations was determined at 9.25 percent per annum, and this rate was kept applicable till the meeting of the Committee 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’s decisions in its eight meetings held during FY 2010/2011:

2 Central Bank of Egypt – Annual Report 2010/2011 Overnight Deposit

Interest Rate Overnight Lending

Interest Rate Lending &

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 interbank rate was close to the CBE overnight deposit rate. However, in light of the political events that Egypt went through and their economic impacts on the money market, the balance of excess liquidity at the banking system decreased. Accordingly, the weighted average of the overnight interbank interest rate rose in the second half of FY 2010/2011, hovering around the middle of the corridor. (see the following chart)

O/N Interbank Rate and Policy Rates

7.508.008.509.009.50

10.0010.5011.0011.5012.0012.5013.0013.5014.00

31 D

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r 200

8

31 M

arch 2

009

30 Ju

ne 20

09

30 Sep

tembe

r 200

9

31 D

ecembe

r 200

9

31 M

arch 2

010

30 Ju

ne 20

10

30 Sep

tembe

r 201

0

31 D

ecembe

r 201

0

31 M

arch 2

011

30 Ju

ne 20

11

( ٪ )

Overnight interbank Deposit facility rate Lending facility rate

The MPC's decisions led to a relative stability of the market interest rates+ on deposits and loans, as the average interest rate on deposits with maturities of three months posted some 6.6 percent per annum at end of June 2011 (against 6.3 percent per annum, at end of June 2010). Concurrently, the average interest rate on loans of one 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


Open 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 was largely attributed to the higher foreign currency sales by the CBE to banks. Within the framework of open market operations, the balance of deposits accepted by the CBE registered some LE 101.5 billion at end of June 2010, decreasing to some LE 83.1 billion at end of January 2011 and continued to gradually decline through the rest of the FY. As an outcome of the repo operations launched by the CBE to pump liquidity for some banks starting from March 2011, net open market operations (absorption and injection) revealed liquidity-injecting operations of LE 14.5 billion at end of June 2011. 1/2- Reserve Money Reserve money reached LE 251.0 billion at end of June 2011, up by LE 47.9 billion or 23.6 percent during FY 2010/2011 (against LE 28.0 billion or 16.0 percent a year earlier). The increase in reserve money was reflected in a growth in currency in circulation outside the CBE by LE 34.8 billion and in banks' local currency deposits by LE 13.1 billion.

Reserve Money and Counterpart Assets* (LE mn)

Balances at End of June 2011

Change During the FY

2009/2010 2010/2011

Value Value A- Reserve Money 250992 27967 47921

- Currency in circulation outside the CBE 179096 17985 34843 - Banks' local currency deposits 71896 9982 13078

B- Counterpart Assets 250992 27967 47921 Net Foreign Assets 147197 18502 (43037) Foreign Assets 156331 25550 (42274) Foreign Liabilities 9134 7048 763 Net Domestic Assets 103795 9465 90958 Claims on the Government (Net) 102562 11998 21951 Claims on Banks (Net) 147 28676 (28863) Net Balancing Items 1086 (31209) 97870 * Derived from the CBE’s balance sheet.

4 Central Bank of Egypt – Annual Report 2010/2011

As for the components of reserve money, the currency in circulation outside the CBE contributed most of the increase (72.7 percent), with a pickup of LE 34.8 billion or 24.2 percent in the reporting year (against LE 18.0 billion and 14.2 percent a year earlier), to post LE 179.1 billion or 71.4 percent of reserve money at end of June 2011. Moreover, banks' local currency deposits at the CBE augmented by LE 13.1 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 year shows that 68.0 percent of the increase was concentrated in the second half of the year (January/June 2011), namely, the period of January 25 Revolution and its aftermath. During January/June 2011, reserve money scaled up by LE 32.6 billion or 14.9 percent. Rising by LE 25.9 billion or 16.9 percent, currency in circulation outside the CBE made the largest impact during the said period, thus accounting for 74.3 percent of its total increase during the whole year. This was ascribed to the large amounts of banknote issued by the CBE in response to the mounting withdrawals by individuals of their deposits at banks, on the back of the circumstances and aftereffects of January 25 Revolution. The pickup in currency in circulation outside the CBE was due to the increase in the balance of banknote issue by LE 33.9 billion or 23.2 percent during the reporting year (against a rise of only LE 18.3 billion or 14.3 percent in the previous FY) to reach LE 180.1 billion at end of June 2011.

Banknote Issue* (LE mn)

Change during the Year At End of June Balance of Banknote Issue Value %

2007 93499 14246 18.0 2008 112705 19206 20.5 2009 127912 15207 13.5 2010 146220 18308 14.3 2011 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 4.0 billion, 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. In addition, about LE 12.6 billion worth of foreign currencies and LE 8.2 billion worth of foreign notes were added to the issue cover. Accordingly, the structure of the cover at end of June 2011 was as follows: 73.2 percent as government bonds, 9.1 percent as gold, 13.2 percent as foreign currencies, and 4.5 percent as foreign notes.

5


The breakdown of the currency in circulation outside the CBE by denomination showed that despite the slight decrease in the relative importance of large denominations (LE 200, LE 100 and LE 50) as a percentage of total currency in circulation, they remained at a high level (90.5 percent against 92.1 percent at the end of June 2010). This was largely due to the climbing relative importance of the LE 200 notes from 31.5 percent to 37.2 percent. By contrast, the relative importance of the LE 100 and LE 50 notes declined from 60.6 percent to 53.3 percent. This mirrored the increasing value of transactions associated with higher prices.

Currency in Circulation By Denomination* (LE mn)

June 2010 June 2011 Change During the FY Denominations

Value Relative

Importance Value Relative

Importance 2009/2010 2010/2011 Total 144253 100 179096 100.0 14.2 24.2 Banknote in Circulation 143947 99.8 178772 99.8 14.3 24.2 PT 25 184 0.1 161 0.1 16.3 (12.5) PT 50 292 0.2 302 0.2 (4.9) 3.5 LE 1 843 0.6 907 0.5 9.5 7.6 LE 5 1495 1.0 2654 1.5 18.9 77.5 LE 10 2844 2.0 2886 1.6 (2.3) 1.5 LE 20 5480 3.8 9672 5.4 (13.0) 76.5 LE 50 18704 13.0 22246 12.4 (18.3) 18.9 LE 100 68641 47.6 73269 40.9 12.8 6.7 LE 200 ** 45464 31.5 66675 37.2 49.0 46.7 Subsidiary 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 year was 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 (44.8 percentage points), which was held back by the negative contribution of net foreign assets (21.2 points).

During FY 2010/2011, net domestic assets at the CBE went up by LE 90.9 billion, against a rise of only LE 9.5 billion a year earlier, to reach LE 103.8 billion at end of June 2011. The increase came as a result of the rise in the CBE’s net claims on the government by LE 21.9 billion (due to the pickup in its claims on the government by LE 39.3 billion or 26.2 percent, and in its deposits at the CBE by LE 17.4 billion or 24.9 percent). Moreover, the net balancing items had an expansionary effect on reserve money, as it went up by LE 97.9 billion shifting from a negative balance to a positive one. This was mainly ascribed to the LE 99.4 billion decline in the deposits accepted by the CBE under the open market operations (used by the CBE to absorb


excess liquidity). Furthermore, the CBE conducted Repo operations to inject liquidity for banks as of March 2011, because of the changes in their liquidity position in light of the higher foreign currency sales of the CBE to banks. The balance of Repo operations registered LE 16.7 billion at the end of June 2011.

The CBE's net claims on banks decreased by LE 28.9 billion, as an outcome of

the decline in its claims on banks by LE 26.4 billion. The decline in CBE claims to banks was, in turn, caused by its lower foreign currency deposits at these banks and the rise in banks’ foreign currency deposits with the Central Bank by LE 2.5 billion worth. Net foreign assets at the CBE rolled back by LE 43.0 billion worth or 22.6 percent, against a rise of LE 18.5 billion worth or 10.8 percent, posting LE 147.2 billion worth at the end of June 2011. The decline was mainly attributed to the drop of 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 LE 156.3 billion worth at end of June 2011. On the other hand, foreign liabilities at the CBE 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 of June 2011. 1/3- Payment Systems and Information Technology (IT)

The CBE’s efforts to develop the payment systems and information technology have been in progress, to bolster the soundness and stability of the financial system, reduce credit risks, expedite payment settlements, and ensure their reliability and confidentiality. The existence of a national payment system was instrumental to the financial stability in Egypt, especially during the 25th of January Revolution, leading as such to the stability of the banking system. In this respect, the following actions were 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


• 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.


• 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 2010/2011 1/3/1- 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 the executed messages, registering 1248.7 thousand messages at a value of LE 15879.7 billion (against 1191.4 thousand messages and LE 13274.7 billion a year earlier). It is worth 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 policy purposes.

RTGS and SWIFT Local Services in Local Currency

Change FY

Number of Messages (Unit)

Value of Transfers

(LE mn) Number Value

2007/2008 700668 3092401 175432 812203 2008/2009 897205 5294357 196537 2201956 2009/2010 1191374 13274677 294169 7980320 2010/2011 1248692 15879701 57318 2605024

According to the statistics of the CBE Automated Clearing House, included in the RTGS since its launch, the number of exchanged cheques increased in the reporting 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, the average value per cheque inched up to LE 48.2 thousand from LE 45.0 thousand.

CBE Automated Clearing House Activity

Change FY Number of

Cheques (thousand)

Value of Cheques

(LE mn) Number Value 2007/2008 11724 483113 11.9 35.4 2008/2009 12062 548038 2.9 13.4 2009/2010 12994 584546 7.7 6.7 2010/2011 13012 626757 0.1 7.2

Transactions executed in foreign currencies under the Fin-Copy system, via SWIFT, showed an increase in terms of number and value. Executed transactions reached 15.1 thousand in number, at a value of US$ 88.1 billion (against 12.2 thousand at a value of US$ 70.0 billion in the previous FY).


SWIFT Local Activity in US Dollar

Change During FY Number of

Messages (Unit)

Value of Transfers (US$ mn) Number Value

2007/2008 13925 105587 1855 26590 2008/2009 12365 83019 (1560) (22567) 2009/2010 12204 70008 (161) (13011) 2010/2011 15066 88052 2862 18044 1/4– 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 1009.4 billion. The rise was due to the growth in net domestic assets, meanwhile net foreign assets dropped. The former increased by 13.2 percent adding to domestic liquidity growth. Part of the liquidity was used by banks to purchase treasury bills in the amount of LE 74.0 billion. On the other hand, net foreign assets decreased by 3.2 percent.

The pickup in domestic liquidity was reflected in the acceleration of money

supply and quasi-money. Money supply augmented by LE 34.7 billion or 16.2 percent (against LE 31.0 billion and 17.0 percent in the previous FY) reaching LE 248.7 billion at end of June 2011. Most of the rise in the reporting year came on the back of the increase in currency in circulation outside the banking system by LE 32.7 billion or 24.2 percent (against LE 17.1 billion and 14.4 percent) posting LE 167.9 billion 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 circulation grew by LE 24.3 billion or 16.9 percent. This can be explained by the increase in the banknotes issued by CBE to compensate the sudden withdrawals of deposits by customers, in the wake of the circumstances and consequences of the 25th January revolution.

Growth Rate of Domestic Liquidity by Component

02468

101214161820

2007/2008 2008/2009 2009/2010 2010/2011

%Money SupplyQuasi-moneyDomestic Liquidity

11


LE demand deposits at banks rose by only LE 2.0 billion or 2.5 percent (against

LE 14.0 billion and 21.6 percent) to LE 80.8 billion at end of June 2011. The increase reflected 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 55.2

billion and 8.5 percent in the previous FY) to stand at LE 760.7 billion at end of June 2011. The pickup in LE time and saving deposits and in foreign currency deposits was behind that rise. The former increased by LE 38.4 billion or 7.0 percent to LE 583.7 billion, representing 76.7 percent of quasi-money and 57.8 percent of total liquidity at end of June.

Domestic Liquidity Components End of June 2011

Quasi-money75.4%

Foreign Currency Time & Saving

Deposits13.5%

Foreign Currency Demand Deposits

4.1%

Local Currency Time & Saving Deposits

57.8%

Money Supply24.6%

Noticeably, the surge in LE time and saving deposits of the household sector by

LE 52.1 billion exceeded the overall increase recorded in this type of deposits. The increase in these deposits could have been larger, but for the decline in the deposits of the 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 saving deposits retreated by LE 8.7 billion or 1.5 percent. The decline was particularly in the deposits of the private business sector (LE 24.5 billion) and in those of the public business sector (LE 2.2 billion). However, the decline was held back by the LE 18.0 billion rise in the deposits of the household sector.

Foreign currency deposits by all sectors increased by LE 18.8 billion or 11.9

percent (against a retreat equivalent to LE 9.1 billion or 5.4 percent) to reach LE 177.0 billion or 23.3 percent of total quasi-money at end of June 2011. The increase was entirely achieved in the second half of the year, in which deposits scaled up by the equivalent of LE 18.9 billion or 12.0 percent.


Against these developments, foreign currency deposits/total deposits

(dollarization ratio) inched up from 20.21 percent at end of June 2010 to 21.03 percent at end of June 2011. This reflected the propensity for saving in foreign currencies, especially given the uncertainty about the LE fluctuations due to the events in Egypt following the 25th January revolution. However, this trend is somewhat limited, noting that LE time and saving deposits of the household sector still accounted for the bulk (almost 65.8 percent) of total quasi-money at end of June 2011.

Contribution of Counterpart Assets to Domestic Liquidity Growth Rate In the year ending June 2008 2009 2010 2011 Domestic Liquidity Growth Rate (%) 15.7 8.4 10.4 10.0 Net 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 892.8 billion. About three quarters of the increase (74.6%) was realized in the second half of the year, as domestic credit moved up by 10.9 percent or LE 87.7 billion, of which 82.8 percent was directed to the government sector.

Domestic Credit by Sector (End of June)

0100200300400500600700800900

1000

2006 2007 2008 2009 2010 2011

LE bnHousehold SectorPrivate Business SectorPublic Business SectorGov. Sector (Net)

Receiving around 94.6 percent of the rise in domestic credit, the share of the

government (including public economic authorities) increased/surged by LE 111.2 billion or 34.1 percent (against LE 53.0 billion or 19.4 percent) posting some LE 437.3 billion or 49.0 percent of total credit at end of June 2011. Such an increase reflects the rise in banks’ holdings of government securities by LE 102.4 billion, and in loans to the government by LE 30.7 billion, on the one hand and the pickup in its deposits by LE 21.9 billion, on the other hand.

13


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 or 11.1 percent of total domestic credit at end of June 2011. The share of public business sector also picked up by LE 3.0 billion or 10.0 percent (against a decline of LE 3.2 billion or 9.5 percent in the previous year, due to the settlement of non-performing loans) ending the year at LE 33.0 billion. Credit to the private business sector rolled back by LE 3.1 billion or 1.0 percent (against an increase of LE 21.9 billion or 7.2 percent) lowering its debts to banks to LE 323.2 billion or 36.2 percent of total credit at end of June 2011.

Relative Structure of Domestic Credit(End of June 2011)

49.0

3.7

11.1

36.2

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 or 11.1 percent), ending the year at LE 253.5 billion. Noticeably, the decline occurred in the second half of the year, where net foreign assets fell by LE 51.8 billion. Yet, the rise of LE 22.8 billion in the first half of the year had somewhat mitigated such a decline, which came as a result of (i) the drop in net foreign assets at CBE by LE 43.0 billion (due to the LE 42.3 billion fall in its foreign assets, and the LE 0.7 billion rise in its foreign liabilities) and (ii) the build up of net foreign assets at banks by LE 14.1 billion. The decrease in the CBE’s net foreign assets is traced to the necessary finance the Central Bank had to provide to meet part of the foreign capital repatriation, in the aftermath of the Egyptian revolution.


0

100

200

300

400LE bn

2007 2008 2009 2010 2011

Foreign Assets & Liabilities of the Banking System at End of June

Foreign Assets

Foreign Liabilities

Net balancing items exerted an expansionary effect on domestic liquidity of LE

3.3 billion. This was brought about by the increase in capital accounts by LE 24.3 billion, coupled with a decrease in inter-bank net credit and debit positions by LE 15.2 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 soundness

of banks’ financial positions and evaluate their performance from the perspective of risk-based supervision. In addition, it ascertains banks’ compliance with the established regulatory standards, including the minimum reserve requirement and liquidity ratios, the maximum limits of a bank’s exposure to a single customer along with his related parties, and exposures abroad, as well as the asset-liability matching in terms of maturity and currency. This is in addition to a number of qualitative standards that ensure the soundness of banks’ performance and the safety of depositors’ funds, including governance rules; information systems efficiency rules; and eligibility and competency criteria for officials and managers of key sectors at banks.

The implications of the recent international financial crises bore out that the

instructions and reform policies adopted by the CBE to restructure banks, raise their capital and strengthen their risk management systems were instrumental in containing the effects of these crises. Moreover, the CBE had thoroughly monitored the financial crises in many countries, especially in the euro zone, so as to be capable of making immediate decisions - when necessary - to counteract the spillovers in due time.

15


Hereunder are the decisions taken by the CBE over the last quarter of FY 2010/2011 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 are

mainly:

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.


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 CBE's Board

of Directors approved - on its session of 6 April 2004 –competency criteria for chairmen, board members and executive managers of banks, to make sure that they are qualified for their posts. Competency criteria were modified on 24 November 2009, where a new criterion was introduced, prohibiting any official to simultaneously combine between two positions as a senior manager in a bank and a member of the board of directors of another bank. The new criterion was applicable to future nominations, with the exception of those banks entirely owned by a bank. It intended to prevent any conflict of interests, in compliance with good governance practices. In addition, interviews are made with the chairmen, deputy chairmen, managing directors, executive board members of banks and executive directors to ensure their eligibility for the positions they are nominated for, with a particular attention being paid to candidates for risk- and compliance-related positions.

As for foreign nominees at banks (board members and executive directors), a

criterion was set, whereby the regulatory authority of the parent bank, or the last bank the nominee has worked in (as the case may be) is to be consulted about that nominee, to identify his/her eligibility for the vacant position. In this context, the register of banks witnessed the addition of five chairmen, five vice-chairmen, three managing directors, four executive board members, twenty six non-executive board members, two specialized members, a regional manager for a foreign bank branch, a regional deputy manager for another foreign bank, seven chief executive officers for representation offices in Egypt, one general manager and one executive director in a bank, and two executive directors at risk, compliance, credit, investment, treasury and internal inspection departments.

In light of the study conducted on some of the banks' statutes relating to the

periodicity and location of board meetings of banks, the CBE Board of Directors agreed, on its session dated 20 June 2009, to allow board meetings to be held outside Egypt only once during the fiscal year on exceptional basis.

On the other hand, amendments to certain articles of the statute of eleven

banks, and the addition of 86 new branches of 24 banks were recorded in the register of banks.

17


In line with the policy of the CBE that promotes the growth and geographical

expansion of banks by opening small branches, a number of standards and regulations were proposed and are currently raised to the senior management for approval after studying the experiences of several countries, such as the United States, Japan, China and Saudi Arabia, to choose the most optimal and appropriate one for the Egyptian market. The said branches shall provide a number of specific services. These are exclusively 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 bank's core capital was set for each small

branch. The working hours of each branch shall be determined according to the requirements of its location. Staff head count of each branch shall not exceed three qualified persons.

The CBE is currently in the process of updating the rules of examining the

documents required from the houses of expertise (that are qualified for participating in the evaluation of guarantees provided to banks) to be listed in the register of houses of expertise at the CBE (63 houses of expertise were listed so far). This step is bound to raise the efficiency and effectiveness of the credit decisions made by banks to prevent the recurrence of the problem of nonperforming loans. Moreover, the auditors authorized to audit the financial statements of banks shall be registered in a special register, in conformity with specific criteria that ensure a satisfactory degree of efficiency and expertise. 30 new auditors were recorded during the reporting year.

Recently, banks have been eager to provide e-banking services to keep pace

with the technological progress in this field. Such services are either traditional or innovative (effected via electronic networks) and had been regulated earlier by the rules issued by the CBE Board of Directors on 28 February 2002. Later, on 2 February 2010, the CBE Board of Directors approved the regulations governing the operation of payment orders via mobile phones in Egypt. Furthermore, the CBE has proceeded with updating the rules of internet banking, so as to reduce the risks inherent 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, in cooperation with Fawry Company for Banking and Payment Technology Services.


The CBE allowed banks to participate in the establishment of the different

types of mutual funds, to cater for risk-averse investors who have cash money but lack the necessary experience, know-how, or time to invest in such tools that yield good returns. Nine banks were given approval to start procedures for establishing 11 new mutual funds.

In order to encourage individuals to save, registered banks were allowed to issue saving systems of three years or more, with some privileges, to be able to raise their market interest rates above the short-term interest rates. Also, banks were permitted, during this year, to issue new saving vessels and to make adjustments to the existing ones, with the aim of increasing the volume of medium- and long-term savings, to help banks finance production and industrial enterprises.

To organize dealing in the forex market in Egypt and maximize savings received from workers abroad, off-site supervisions are exercised on forex dealers, and money transfer companies in Egypt, in accordance with the Law governing the Central Bank, Banking Sector and Money Market.

In this respect, it is worthy to note that while the report is being prepared, three new companies, and 24 branches were registered as currency exchangers, thus bringing 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 as well as Egyptian pounds, to cover part of the State’s needs of foreign currencies and encourage 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 the report.

As part of the ongoing efforts made by the General Department for Credit Risk Pooling 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


In view of the current circumstances, the Department for Credit Risk Pooling

has continued to perform its usual duties. To elaborate, the Department receives banks' statements on the volume of credit facilities granted thereby to customers, on the CBE's website, prepares the aggregate positions of those customers, as well as the memorandums to be presented to the senior management, and responds to the complaints filed by bank customers pertaining to credit risk information.

As regards on-site supervision, the CBE made great progress with the 2010/2011 plan for the inspection of the banking sector units (banks) and currency dealers. Under this plan, each bank is inspected (either in whole or in part) on an annual basis, according to the level of its risks and the quality of its products and activities. Moreover, an examination of certain issues is made, to help take immediate corrective actions as deemed necessary, needless of waiting for the full inspection of those banks to be carried out. In addition, the system of specialization-based examination was adopted to enable bank inspection to be conducted by inspectors specialized in the relevant activities (e.g. retail banking, market risks, IT, etc.). That approach is meant to render the inspection process more effective and in-depth by providing a thorough risk profile of the inspected bank. In this context, a core team was formed to follow up and manage IT systems, in collaboration with off-site supervision. The aim is to identify common risk areas at banks, especially those of high incidence, and monitor progress on the execution of corrective actions.

Inspection reports made lately have helped to upgrade the risk management

framework in several banks and further the application of the international best practices in this area.

Furthermore, the main concern as of February 2011 was to check on the

transfers made by Egyptian banks, guided in this respect by the relevant instructions of the CBE - in cooperation with the departments concerned - in the aftermath of the latest events that hit the country. Moreover, the CBE continued to update bank inspection reports under the usual plan, taking into account the said circumstances.

On the other hand, the Supervision Sector at the CBE continued to cooperate

with the supervisory and judicial authorities in settling a number of money and banking issues. Moreover, the Sector examines the complaints filed by bank customers and provides the required banking expertise.


1/6- 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 banking sector, and enhancing its competitiveness and ability for risk management, so that it can perform its role in financial intermediation in support of the national economy, and availing/achieving the targeted development. The reform program is based on a number 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


- 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.


• 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 have

proceeded, following the successful implementation of the first phase, which was centered 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 of December 2004 to 39 banks at end of December 2008 and the number is still the same thus far. Under this program, 80 percent of the share capital of the Bank of Alexandria was sold to Italy’s Sanpaolo Bank, besides the divestiture of the shareholdings of state-owned banks in a number of joint venture banks.

With respect to the second pillar, state-owned banks were restructured under a

comprehensive and time-lined plan, designed by the Banking Reform Unit at the CBE. The plan was intended to develop all departments and technological systems, besides establishing new departments, particularly for risk management, information technology (IT), and human resources. To this end, a project on the application of the international best practices - implemented with the assistance of foreign consultants - was completed on time. In addition, a full audit of state-owned banks was conducted according to international accounting standards, covering the years from 2004 to 2008. Finally, the recruitment of highly qualified banking cadres and senior management at state-owned banks (financed by the Banking Reform Fund) enabled those banks to push ahead with reform and development.

Concerning the third pillar, to address the problem of non-performing loans, the CBE's NPL Management Unit worked out a variety of approaches and programs that helped settle more than 90 percent of NPLs (excluding debts of the public business sector). With regard to the non-performing loans of public business sector enterprises to public banks, about 62 percent was repaid in cash to the public commercial banks. As for the remaining debts (38 percent), an agreement was signed on 14/9/2009, whereby in-kind repayment of the remaining debt was made by the end of June 2010.

23


As to asset quality indicators at banks, the ratio of non-performing

loans/total gross loans decreased from 13.6 percent at end of FY 2010 to 11 percent at 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 from 92.5 percent to 93.6 percent.

A program to reform the Supervision Sector was devised to achieve the

following targets: enhance the efficiency of this sector by benefiting from international best practices, and apply the concept of risk-based supervision to ensure the sector’s robustness and soundness. Furthermore, efforts were exerted to recruit highly qualified staff versed in advanced technology, enhance the efficiency of human cadres to be capable of managing this key sector, and upgrade the management information system (MIS) to ensure timely access to accurate data. In this context, a technical assistance program in collaboration with the European Central Bank (ECB) and four European central banks, was completed in the last quarter of 2007.

It is noteworthy that the successful and timely implementation of the first phase of the CBE's banking reform program has enabled this sector to weather the adverse effects of the global financial crisis and deal properly with the current circumstances. 1/7- Management of the Foreign Exchange Market and International Reserves 1/7/1- Foreign Exchange Market and Dollar Interbank

The Central Bank of Egypt (CBE) kept up its successful management of the foreign exchange market through the dollar interbank system. Succeeding earlier in weathering the pass-through effects of the international financial crisis, the market proved for the second time resilient and effective in the face of the post-revolution economic crisis, which is responsible of the noticeable reduction in foreign investments in the second half of the reporting year. The market performance was highly instrumental in shielding the LE exchange rate from any sharp fluctuations, as the weighted average of the US dollar interbank rate posted LE 5.9690 at end of June 2011 (against LE 5.8496 at end of January), signifying that the decline in the value of the 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 at end of December. All this undoubtedly shored up investors’ and dealers’ confidence in the efficiency and credibility of the Forex market, thus promoting market stability and staving off any fears or disruptions, besides subduing the impact of the crisis on the economy, and bettering its prospects for recovery. Considering the FY 2010/2011 as a whole, the Egyptian pound depreciated by 4.6 percent versus the US dollar.


1/7/2- International Reserves

Affected by the events occurring in Egypt in the second half of the year, NIR with the CBE shrank by US$ 8.6 billion or 24.6 percent in FY 2010/2011, ending the year 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 revenues dwindled 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. Despite the drop in NIR, they covered 6.3 months of merchandise imports at end of June 2011. 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).

1/8- Domestic and External Public Debt

1/8/1- Domestic Public Debt

During FY 2010/2011, domestic public debt stood at LE 1044.9 billion at end of June 2011 (76.2 percent of GDP at current market prices), up by LE 156.2 billion or 17.6 percent. It is noteworthy that domestic public debt consists of the sum of net government debt, public economic authorities' debt and debt of the National Investment Bank (minus intra-debt of both public economic authorities and the government to the NIB).

Net International Reserves & Months of Merchandise Imports End of June

0

6

12

18

24

30

36

2005 2006 2007 2008 2009 2010 2011

(US$ bn)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

NIR NIR/Months of Merchandise Imports

( Months )

25


1/8/1/1-Debt of the Government (Net) The government's domestic debt (net) amounted to LE 808.1 billion at end of June 2011(58.9 percent of GDP), up by LE 144.3 billion or 21.7 percent. The rise was induced by the LE 137.7 billion increase in the balances of Treasury bonds and bills and the LE 4.6 billion decline in the credit position of net government balances at the banking system (due to the increase in government loans and deposits by LE 19.2 billion and LE 14.6 billion, respectively). Another factor behind the acceleration of government debt was borrowing from other local entities in the amount of LE 2.0 billion.

808.1

66.3

238.2

-67.7

1044.9

-200 0 200 400 600 800 1000 1200

Net Domestic Debt ofthe Government

Net Debt of EconomicAuthorities (Net)

NIB Debt (Net)

Intra-Debt

Gross Domestic Debt

Gross Domestic Public Debt at End of June 2011 (LE bn)


Domestic Debt of the Government (Net)

(LE bn ) June 2010 June 2011 Balances at End of

Value % Value %

Change (+) -

2010/2011 Government 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 14.6

Net government domestic debt/GDP (%) 55.0 58.9 Source: 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 bills was 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


5- 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.

1/8/1/2- Debt of the Public Economic Authorities (Net)

In FY 2010/2011, net debt of the public economic authorities went down by LE 1.5 billion to LE 66.3 billion at end of June 2011. The fall was traceable to the decrease 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 LE 10.1 billion), in addition to the rise in their borrowing from the National Investment Bank 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 at end of June 2011, up by LE 16.0 billion in the reporting year. The rise was a twofold effect of the expansion in the NIB's total invested resources by LE 13.1 billion to LE 240.9 billion at end of June 2011, and the decline in its deposits at the banking system by LE 2.9 billion.

Net Domestic Debt by the Government

-200

0

200

400

600

800

1000

June 2009 June 2010 June 2011 0

10

20

30

40

50

60

70

Treasury BillsBonds& Other Credit FacilitiesNet Government Balances With the Banking SystemRatio of Government Debt / GDP

%LE bn

28 Central Bank of Egypt – Annual Report 2010/2011 1/8/1/4- Intra-Debt

Intra-debt of public economic authorities and the government to the NIB

reached some LE 67.7 billion at end of June 2011, against LE 65.1 billion at end of June 2010. Loans extended by the NIB to these authorities registered about LE 52.2 billion, with an increase of LE 0.7 billion in the reporting year, while NIB's investments in government securities (bills and bonds) amounted to LE 15.5 billion, up by LE 1.9 billion.

1/8/2- External Debt∗ Outstanding external debt (public and private - all maturities), denominated in US dollar, increased by about US$ 1.2 billion, to US$ 34.9 billion at end of June 2011, 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.

Resources of the NIB at End of June 2011 (LE bn)

Dollar Dev elopment

Bonds & Others 2.9

Social Insurance Funds62.6

Proceeds of Inv estment

Certificates & Accumulated Interest 103.4

Post Office Sav ing Account

72.0

Deposits with the Banking System

2.7Loans to

Economic Authorities

52.2

Inv estments in Treasury Bills &

Bonds 15.5

Loans to Holding Companies & Affiliate Units, Concessional

Lending & Others 170.5

Uses of the NIB at End of June 2011(LE bn)

29


Turning to external debt service (medium- and long-term), debt service payments accelerated by US$ 158.4 million, posting about US$ 2.8 billion in FY 2010/2011, compared with the preceding FY. The acceleration reflected the rise in principal repayments by US$ 174.7 million to US$ 2.1 billion, and the retreat of nearly US$ 16.3 million in interest payments to about US$ 636.2 million.

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 accounted for US$ 1.9 billion or 5.5 percent at end of June 2011.

Below is the distribution of external debt by: 1- Maturities 2- Debtors 3- Main currencies 4- Main creditors

External Debt and Debt ServiceEnd of June

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2005 2006 2007 2008 2009 2010 20112.3

2.4

2.5

2.6

2.7

2.8

2.9

3.0

3.1

3.2

External Debt Debt Service (right axis)

US$ bn US$ bn

Medium and Long-Term External Debt Service during Fiscal Years

0500

10001500200025003000350040004500

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

US$ mn.


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$ 32.1 billion) of external debt at end of June 2011, of which long-term and medium-term debt represented US$ 31.6 billion and US$ 494.0 million, respectively. Short-term debt 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 the total debt) were owed to Paris Club members, in the form of bilateral loans (rescheduled or non-rescheduled), and suppliers’ and buyers’ credit. Debt to countries other than Paris Club members amounted to US$ 1.0 billion (2.9 percent) at end of June 2011. 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 guaranteed government securities falling due in September 2015; US$ 186.9 million of sovereign dollar bonds, reaching maturity in July 2011; and US$ 343.4 million worth of government bonds issued in LE abroad and falling due in July 2012. This is in addition to the bills issued in April 2010, in the amount of US$ 1.0 billion, falling due as two tranches in April 2020 and 2040. Non-guaranteed debt of the private sector registered US$ 17.5 million (0.1 percent of total external debt). Short-term debt (7.9 percent) rolled back by 6.7 percent to some US$ 2.8 billion (65.6 percent of which was owed by the private sector). The decline resulted from the fall in the short-term deposits of non-residents by 28.5 percent to US$ 972.7 million, and the rise in short-term trade facilities by 11.9 percent to US$ 1.8 billion.

External Debt StructureEnd of June 2011

Short-term debt7.9%

Rescheduled bilateral debts

36.9%

Other bilateral debts15.0%

Suppliers' & buyers' credits1.2%

International & regional

organizations30.9%

Egyptian bonds and notes8.1%

Private sector (Non-guaranteed)

0.1%

31


2- External Debt by Debtor

The breakdown of external debt by debtor at end of June 2011 showed that the stock of debt of the central government scaled up by US$ 842.9 million to US$ 27.1 billion, of other sectors by US$ 367.4 million to US$ 4.6 billion, and the monetary authority by US$ 239.8 million to US$ 1.5 billion (including a rise of US$ 1.2 billion in long-term obligations, to provide for the IMF's allocations of SDRs for Egypt). By contrast, the debt of banks decreased by about US$ 238.6 million to US$ 1.7 billion.

Nonetheless, the above-mentioned developments had no significant effect on the structure of external debt by debtor, as the central government remained the major obligor, with a share of 77.6 percent at end of June 2011, followed by the other sectors (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 manifested that the US dollar was the main currency of borrowing, with a relative importance of 39.4 percent because of outstanding obligations in US dollar owed to creditors other than 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).

External Debt by Debtor (US$ billion)

June 2010 June 2011

Monetary Authority

1.3

Banks 2.0

Other Sectors

4.2

Central & Local

Gov ernment

26.2

Monetary Authority

1.5

Banks 1.7

Other Sectors

4.6

entral & Local

ov ernment

27.1


4-External Debt by Creditor

The breakdown of external debt by creditor revealed that 42.9 percent of the total debt was owed to the four main Paris Club members; namely Japan (12.2 percent), Germany (11.0 percent), France (10.7 percent) and USA (9.0 percent). On the other hand, the Arab countries combined accounted for 4.6 percent and the main creditors were Kuwait (2.3 percent), Saudi Arabia (0.9 percent) and the UAE (0.5 percent).

External Debt by Major CurrenciesEnd of June 2011

Euro28.8%

Kuw aiti dinar6.1%

Sw iss franc1.8%

Egyptain Pound1.7%

Japanese yen12.8%

US dollar 39.4%

Other currencies1.9%

SDRs7.5%

External Debt by Creditor

Egy ptian bonds and notes

8.1%France10.7%

USA9.0%

Japan12.2%

Arab Countries4.6%

United Kingdom2.7%

Germany11.0%

International organizations

30.9%

Other countries10.8%

June2011

33


External Debt by Creditor (US$ mn)

June 2010 June 2011 At End of Value Relative

Importance Value Relative

Importance Total External Debt 33694.2 100.0 34905.7 100.0 USA 3431.1 10.2 3132.5 9.0 Japan 4005.2 11.9 4258.3 12.2 EU Countries 10318.7 30.6 10879.0 31.2 France 3674.7 10.9 3741.4 10.7 Germany 3350.1 9.9 3854.9 11.0 UK 961.0 2.9 942.6 2.7 Spain 680.1 2.0 645.9 1.9 Italy 762.8 2.3 718.9 2.1 Austria 384.1 1.1 403.4 1.2 Denmark 247.6 0.7 285.7 0.8 The Netherlands 102.3 0.3 112.8 0.3 Belgium 87.3 0.3 87.9 0.3 Sweden 36.9 0.1 42.0 0.1 Others 31.8 0.1 43.5 0.1 Arab Countries 1607.3 4.7 1626.5 4.6 Kuwait 779.9 2.3 854.1 2.3 Saudi Arabia 307.7 0.9 307.6 0.9 UAE 192.1 0.6 162.4 0.5 Libya 71.9 0.2 55.4 0.2 Jordan 41.2 0.1 32.8 0.1 Yemen 49.7 0.1 55.8 0.2 Sudan 25.5 0.1 24.7 0.1 Others 139.3 0.2 133.7 0.3 International and Regional Organizations 9977.5 29.6 10808.6 30.9 IDA 1342.5 4.0 1369.5 3.9 Arab Fund for Economic and Social Development 1234.3 3.7 1325.4 3.8 European Investment Bank 1984.9 5.9 2032.6 5.8 World Bank 2529.3 7.5 2620.4 7.5 AMF 73.4 0.2 29.8 0.1 African Development Fund and Bank 1366.2 4.1 1537.0 4.4 Islamic Development Bank (Jeddah) 63.6 0.2 106.4 0.3 Other Organizations 1383.3 0.6 1787.5 5.1 Egyptian Bonds and Notes 3079.5 9.2 2821.0 8.1 Other Countries 1274.9 3.8 1379.8 4.0


- New Commitments on Loans and Facilities

The year witnessed new commitments on loans and facilities for US$ 1.7 billion, mostly from international and regional organizations (US$ 1.6 billion or 93.9 percent of the total commitments). The remaining 6.1 percent constituted com-mitments on bilateral loans. Thus, total commitments declined by US$ 1.4 billion below the level of the previous FY, due to the noticeable fall in loan commitments with the World Bank and Japan.

- Main Indicators of External Debt

In the FY ending June 2011, the key indicators of external debt showed a drop in the debt/GDP ratio to 15.2 percent, from 15.9 percent, whereas external debt per capita rose to US$ 413.6 (from US$ 399.2 at end of June 2010). The ratio of government debt/total debt decreased to 77.6 percent, from 77.9 percent at end of June 2010.

Notwithstanding the 7.1 percent rise in current receipts (export proceeds of goods and services and net transfers), the ratio of debt service stood at 4.5 percent in the reporting and comparison periods. The 6.7 percent drop in short-term debt drove down 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 10.4 percent, because of a sharper decline in international reserves compared to short-term debt.

External Debt IndicatorsEnd of June

65.277.9

20.1 15.2

450.0

413.6

0.025.050.075.0

100.0125.0150.0175.0200.0225.0250.0275.0300.0

2007/08 2008/09 2009/10 2010/11

%

370.0380.0390.0400.0410.0420.0430.0440.0450.0460.0

(US$)

Government External Debt / Total External Debt External Debt /GDP External Debt per capita (US$) (right axis)

35


The following table highlights the indicators of external debt in Egypt, relative to other groups of economic regions. The IMF’s classification revealed that Egypt’s external 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 15.3 percent for the developing Asian economies and 66.0 percent for North and Central European countries. Moreover, the indicator of debt service/exports of goods and services recorded 5.7 percent, i.e. less than the global levels forecast for 2011, that ranged between 11.0 percent for sub-Saharan Africa and 55.8 percent for North and Central Europe, according to the IMF’s World Economic Outlook.

Main Debt Indicators in Egypt Vs. Economic Regions

Region External Debt/

GDP External Debt/

Exports of Goods & Services

Debt Service/ Exports of Goods

& Services 2010 2011 2010 2011 2010 2011 North & Central Europe 65.5 66.0 179.2 164.2 59.7 55.8 Asia 15.3 15.3 48.8 47.5 18.5 20.0 Latin America & the Caribbean 21.2 20.1 102.5 93.1 31.2 29.2 Sub-Saharan Africa 22.8 21.5 65.5 57.6 15.8 11.0 Middle East & North Africa 31.9 27.1 65.9 52.4 17.2 15.3 Egypt* 15.9 15.2 71.0 71.4 5.5 5.7 Source: IMF’s World Economic Outlook - Sept. 2011 (Statistical Appendix). * According to BOP data- Central Bank of Egypt.

External Debt Indicators FY

4.53.9

10.4

7.3 7.97.4

5.74.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2007/08 2008/09 2009/10 2010/11

%

Debt Serv ice / Current Receipts (including transf ers)Short-term Debt / Net International Reserv esShort-term Debt / Total External DebtDebt Serv ice / Exports of Goods and Serv ices

36 Central Bank of Egypt – Annual Report 2010/2011 1/9- Human Resources Development (HRD)

In the reporting year, the Central Bank of Egypt (CBE) has been keen to make headway with the development of the human resources in the banking system by qualifying a new generation of banking cadres for managing this vital sector. In this respect, the CBE relies on the Egyptian Banking Institute to design and implement a number of specialized programs in all banking fields to keep pace with the latest international banking developments. 1/9/1- Activity of the Egyptian Banking Institute (EBI) In pursuit of developing and upgrading the efficiency of the banking staff, the EBI has been making progress with its training plan in the reporting year. The chart below illustrates the number of participants in these programs and the hours of training in the reporting year, as compared with the previous year. According to the training plan of the EBI, which comprised annual and special contractual programs, greater attention was given to special certificates, particularly as related to the qualification of senior and junior banking managers.

A Comparison of the Overall Training Activity

24089 24279

21283

25244

20000

21000

22000

23000

24000

25000

26000

Participants Hours

2009/2010 2010/2011

It is noted that the total number of participants went down during the reporting

year, influenced by the dramatic events of January 25th Revolution, which led to the disruption of training activity at the Institute in the first three months of 2011, but it returned back to normal in May and June.

The following charts indicate the number of participants and the training hours

during FY 2010/2011.

37


In the reporting year, the Institute, in collaboration with national and

international experts, arranged for a number of symposiums, conferences, workshops, and seminars (for bank staff, academics and researchers). In this context, 23 symposiums were organized, attended by 1293 trainees. Moreover, the EBI activated and developed its partnership with international institutions, inter alia “Agence de Transfert de Technologie Financière (ATTF)”, Luxembourg, in the area of leadership, anti-money laundering and financial markets; “Global Talent Intelligence Strategies (GTIS)” in the area of credit; “ToneStar Consulting” in the area of risks, and “MIS Training Institute” in internal auditing. Around 36 programs and international scholarships were offered for 573 trainees during the year. In addition, a number of programs were introduced, in collaboration with some international institutions, including the “Global Association of Risk Professionals (GARP)”, “Institute of Internal Auditors (IIA)”, and the “Islamic Research and Training Institute (IRTI)” of Saudi Arabia. It is inescapable to say that the EBI has been working in the past years to maximize cooperation with these institutions.

The EBI also participated in the OECD's International Network on Financial

Education (INFE), to undertake collective activities related to financial education. The institute issued the first information bulletin entitled “the Difference between Financial Education and Financial Availability”, and is about to release other successive periodicals for distribution among miscellaneous symposiums, con-ferences and training programs. Furthermore, to keep up with the advanced technology 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 Bank's plan to develop the banking system

in Iraq, the EBI implemented an inclusive program in the field of bank supervision, offered a certificate in human resources, and introduced accounting, auditing and risk management programs (attended by 52 participants in FY 2010/2011). Considering the progress made on this front, the World Bank decided to repeat these programs in the forthcoming period.

The Relative Distribution of the No. of Training Hours in Training Programs

Evaluation and Exams

4%

Specialized Certificates

18%

Seminars and

Conference1%

Private and Contractual

programs57%

Training Plan20%

The Relative Distribution of Participants in Tranining Programs

Evaluation and Exams

16%

Specialized Certificates

7%

Seminars and

Conference8% Private and

Contractual Programs

54%

Training Plan15%


To encourage junior bankers to make studies and researches, the EBI announced in June 2011 a research competition, sponsored by the CBE, on three key banking topics, specifically “the role of the Egyptian banking sector during the economic turmoil on the short-run”; “the pricing mechanism of the banking products and its effects on the bank's profitability”, and “the role of social corporate responsibility in the banking sector after the 25 of January Revolution”. Furthermore, the EBI introduced two studies, entitled “potentials and obstacles” and “the successful Malaysian experience in the development of SMEs”, with a focus on the main lessons to be learned and how to apply them to Egypt.

Under the “Training for Employment” program, the Institute trained 918 fresh

graduates from the Egyptian universities, to narrow the gap between academic education and labor market needs. Furthermore, a protocol was signed for the purpose 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, and acquaint the banking staff with the finance programs of SFD, on the other. In addition, the protocol aims also to qualify SME entrepreneurs to deal with the banking system, as they need banking finance, especially in the field of agriculture projects and franchise.

The number of participants in the CBE staff training plan reached 2036

trainees, involving 1502 participants in local programs (specialized and administrative, as well as language and computer courses), 416 trainees in qualifying programs, and 113 participants in external programs. Also, five employees at the bank completed their post-graduate studies.

Participants from the CBE in Training and Qualifying Programs

1024

123 25416

113 5

3511

1502

0

500

1000

1500

2000

2500

3000

3500

4000

Qualifying programs External programs Post-graduate programs Local programs

No.

2009/2010 2010/2011

39


In FY 2010/2011, the Banking Institute offered a diversed range of training programs for 1944 trainees of the CBE employees. This is in addition to the programs designed for the Banking Supervision Sector (attended by 255 participants), tackling issues of particular importance (e.g. banking credit; rules of preparing financial statements of banks; principles of recognition and measurement; and detection of forgery and falsification of documents). Within the framework of “MENA Financial Regulators Training Initiatives”, a program was provided in cooperation with US Federal Reserve, entitled “Bank Analysis and Examination School”, involving 18 of the staff of the CBE and some Arab central banks. The initiative also included manager promotion programs (129 participants), and others for supervisor development (93 participants), along with various financial and administrative programs.

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


Chapter 2 Banking Developments

2/1- Financial Position

The aggregate financial position of registered banks in Egypt (39) posted LE 1269.7 billion at end of June 2011, up by LE 49.0 billion or 4.0 percent in the FY 2010/2011 (against LE 128.7 billion and 11.8 percent in the previous FY). The increase came about despite the fall of LE 13.2 billion in their financial position in the second half of the year. Such a fall is explained by the LE 101.1 billion decline in balances at banks (including the CBE), brought about by the decrease of LE 103.4 billion in banks' obligations to the CBE, following the withdrawal of a portion of CBE deposits with these banks. The CBE used these deposits to make up for foreigners’ liquidation of a sizeable portion of their investments, on the back of the Revolution. However, the fall was somehow eased by the increases in securities and investments (LE 33.0 billion), balances with banks abroad (LE 28.9 billion), and lending and discount balances (LE 16.1 billion).

The increase on the liabilities side is mainly ascribed to the growth of deposits

by LE 64.5 billion or 7.2 percent, posting LE 957.0 billion (75.4 percent of the aggregate position of banks at end of June 2011). Other affecting factors included banks’ augmentation of their equity by LE 6.0 billion or 8.0 percent, and the pickup in bonds and long-term loans by LE 4.5 billion. However, the rise was offset by the decline of obligations to local banks (including the CBE) by LE 25.7 billion or 47.7 percent; the drop in provisions by LE 15.3 billion or 21.7 percent; and in obligations to banks abroad by LE 5.1 billion.

Banking Liabilities & Relative Importance of their Componentsat End of June

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 20110

300

600

900

1200

1500LE bn

Equities ProvisionsBonds & Long-term Loans Obligations to Local BanksObligations to Banks Abroad Total DepositsOther Liabilities Total Liabilities (Right Scale)


Changes in Liabilities (LE mn)

Change in FY 2009/2010 2010/2011 Value % Value % Capital 5047 12.1 12451 26.7 Reserves 7115 33.3 (6430) (22.6) Provisions 670 1.0 (15312) (21.7) Bonds and long-term loans (348) (1.6) 4483 20.7 Obligations 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 7.2 Other liabilities, of which: 8392 10.7 20145 23.2 Payable cheques 1188 33.2 379 8.0 Total liabilities 128662 11.8 49035 4.0

The pickup on the assets side was mainly due to the hike in banks' investments in 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 banks abroad also increased by LE 38.7 billion worth, or 67.5 percent, and so did lending and discount balances (up by LE 8.1 billion or 1.7 percent), reaching LE 474.1 billion. Meanwhile, balances with local banks declined by LE 83.7 billion or 41.7 percent.

Banking Assets & Relative Importance of their Componentsat End of June

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 20110

300

600

900

1200

1500

LE bn

Cash Securities & Investments in TBsBalances with Local Banks Balances with Banks AbroadLending & Discount Balances Other AssetsTotal Assets (Right Scale)

43


Change in Assets

(LE mn) Change in FY

2009/2010 2010/2011 Value % Value % Cash 1321 11.9 2382 19.1 Securities and investments 73298 22.0 68281 16.8 Balances 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 21.4 Balances 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 1.7 Other assets 10523 15.5 15223 19.5 Total assets 128662 11.8 49035 4.0

The increase in banks' investments in securities and bills during the year was mainly due to the rise in banks' investments in treasury bills by LE 74.0 billion and in government bonds by LE 22.9 billion. However, the rise was held back by the contraction in banks' investments in foreign securities by LE 24.2 billion and in non-government bonds by LE 4.1 billion.

Net transactions of local banks with correspondents abroad revealed a rise in their net credit balances abroad by the equivalent of LE 43.8 billion, driving up their net transactions with banks to LE 80.9 billion worth at end of June 2011 (against LE 37.1 billion at end of June 2010). The rise resulted from the increase in their balances with banks abroad by the equivalent of LE 38.7 billion, and the decline in their obligations thereto by LE 5.1 billion.

Relative Structure of Banks' Portfolio Investment

43.0

33.8

3.78.2

11.3

52.4

33.7

2.36.9

4.6

0

10

20

30

40

50

60

70

Treasury Bills Gov. Bonds Non-gov. Bonds Corp. Equities Foreign Securities

%

June 2010

June 2011

44 Central Bank of Egypt – Annual Report 2010/2011 2/2- Deposits

In FY 2010/2011, banks' deposits (including government deposits) went up by LE 64.5 billion or 7.2 percent (against LE 82.8 billion or 10.2 percent in the previous FY), ending the year at LE 957.0 billion or 75.4 percent of the aggregate financial position. A considerable part of the increase in deposits (60.2 percent) emanated from the rise in local currency deposits by LE 38.8 billion or 5.7 percent, to register LE 724.9 billion at end of June 2011. Likewise, deposits in foreign currencies increased by 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 2011 Total 598.6 686.1 724.9 211.1 206.4 232.1 Government sector 49.6 58.5 56.7 41.5 45.6 51.4 Public business sector 28.8 32.7 29.3 8.7 6.5 7.6 Private business sector 104.3 114.4 104.0 58.3 54.9 60.2 Household sector 413.5 477.9 532.0 100.2 96.9 109.2 External 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 currency deposits. Its deposits scaled up by LE 54.2 billion or 11.3 percent, registering LE 532.0 billion or 73.4 percent of total deposits at end of June 2011. In contrast, the deposits of the private business sector decreased by LE 10.4 billion, public business sector by LE 3.4 billion and government sector by LE 1.8 billion. As for foreign currency deposits, the household sector was again the key depositor, contributing approximately half of their increase. Its deposits, expressed in Egyptian pound, grew by LE 12.3 billion, to register LE 109.2 billion or 47.1 percent of total foreign currency deposits at end of June 2011. Meanwhile, a pickup was noticed in the foreign currency deposits of the government sector (up by LE 5.8 billion to LE 51.4 billion). Those of the private business sector also rose by LE 5.3 billion worth, and so did the external sector by LE 1.2 billion and the public business sector by LE 1.1 billion.

45


2/3- 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, thus representing 37.3 percent of total assets and 49.5 percent of total deposits at end of June 2011.

Change in Bank Loans by Sector in FY 2010/2011

(LE mn) End of June Local Currency Foreign Currencies Total 14110 (5961) Government sector 2802 (2384) Public business sector 3509 (634) Private business sector 2116 (4509) Household sector 5846 569 External sector (163) 997

The pickup in the lending and discount balances was an outcome of the rise in local currency loans by LE 14.1 billion or 4.5 percent, to score LE 327.8 billion at end of June 2011, and the decline in lending and discount balances in foreign currencies by LE 6.0 billion worth or 3.9 percent, posting LE 146.4 billion. Around 41.4 percent of the increase in local currency loans was extended to the household sector (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 2.1 billion. In contrast, loans to the external sector decreased by LE 0.1 billion. As for loan and discount balances in foreign currencies, the decline primarily reflected the fall in the share of private business sector by LE 4.5 billion worth or 4.4 percent and to the government sector by LE 2.4 billion or 10.0 percent.

Rate of Change in Deposits by Sector

(30)

(20)

(10)

0

10

20

30

40

50

2009/2010 2010/2011 2009/2010 2010/2011

Local Currency Foreign Currencies

%

Government Sector Public Business Sector Private Business Sector Household Sector External Sector


The relative distribution of loans by economic activity indicated that the

manufacturing 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 came next with 27.2 percent, followed by the unclassified sectors including the household sector (24.7 percent), trade (10.1 percent), and agriculture (1.9 percent).

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 the reporting 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 the growth of loans in local currency by LE 17.6 billion and foreign currencies by the equivalent of LE 5.5 billion. In the meantime, the retreat of short-term loans is ascribed to the fall of loans both in foreign and local currencies (by LE 11.7 billion worth and LE 4.0 billion, in order).

Credit Facilities by Economic Activity at End of June 2011

020406080

100120140160180200

Agriculture Manufacturing Trade Services Unclassified

LE bn

Local Currency Foreign Currencies

47


2/4- Cash Flows at Banks

The statement of banks' cash flows showed a surplus of LE 19.6 billion in local transactions, as banks’ resources reached LE 178.9 billion and their uses LE 159.3 billion. That surplus stood in contrast to an equivalent deficit in banks' external transactions. It is worthy to note that banks' sources of funds come from the decrease in assets or the increase in obligations of banks, given that funds are used for the reduction of obligations or the increase of assets.

Regarding local transactions, the resources generated from the decrease in

assets (LE 83.7 billion), were the result of the decrease in the balances at the CBE by LE 83.0 billion in FY 2010/2011. The decline was more conspicuous in the second half of the FY, because of the retreat in banks' deposits at the CBE (the Bank used to utilize these deposits to absorb excess liquidity) as a consequence of the change in liquidity conditions of banks in the post-revolution era. Moreover, balances with local banks decreased by LE 0.7 billion. The resources emanating from the rise in obligations (LE 95.2 billion), came largely from the increase of LE 64.5 billion in deposits with banks (60.2 percent of which was in local currency). Interestingly, the pickup of LE 66.6 billion in household deposits outpaced the total increase in deposits.

The local uses brought about by the increase in assets reflected the increases in

portfolio investments by LE 92.5 billion (mostly bills and government bonds), other assets by LE 15.2 billion, lending and discount balances by LE 8.2 billion, and cash by 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 CBE's withdrawal of its foreign currency deposits at banks to make up for the market exit by some foreigners, in the wake of 25 January Revolution). Moreover, provisions at banks shrank by LE 15.3 billion (due to the settlement of part of non-performing loans of some public sector banks, by debiting from the counterpart accounts of provisions). Obligations to banks in Egypt also fell by LE 1.3 billion.


Banks' Cash Flows Statement*

Local Transactions (LE mn)

2009/2010 2010/2011 1. 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 669

2. 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 15222

Sources/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 decline in their portfolio investments by LE 24.2 billion worth. The uses with the external world exceeded resources, as balances with banks abroad rose by LE 38.7 billion worth, and obligations of local banks to banks abroad decreased by LE 5.1 billion worth.

Banks' Cash Flows Statement*

External Transactions (LE mn)

2009/2010 2010/2011 1. 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 19749

2. 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 38709

Sources/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


2/5- Bank Performance Indicators

The following are the results realized by banks in each area according to their financial positions at end of June 2011: First: Capital Adequacy Standard

By virtue of this standard, banks registered at the CBE (32 banks, excluding branches of foreign banks) are obliged to maintain a specific ratio (a minimum of 10 percent) of the capital (core and supplementary) to risk-weighted assets and contingent liabilities.

Assets and contingent liabilities are calculated on risk-weights ranging between

0 and 100 percent (or above 100 percent for real estate development companies operating in the construction of for-sale housing units if the project’s leverage exceeds 2 : 1, and for the banking finance granted for total or partial acquisition of companies). Meeting that standard reflects a bank's 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.

More than 20% 12 banks

From 15% to 20% 10 banks

From 10% to 15% 10 banks

Capital Adequacy Standard

31%38%

31%

50 Central Bank of Egypt – Annual Report 2010/2011 Second: Asset Quality

On 24 May 2005, the CBE issued regulations pertaining to customer credit

rating and provisioning. These regulations comprise lending to corporates, taking into account the obligor risk rate (ORR), consumer loans, real estate loans for personal housing, and loans to small-size economic enterprises.

The following chart shows the beneficiary entities of credit facilities:

Third: Profitability

This indicator shows the level of profitability realized by a bank, its ability to support shareholders' equity, and distribute dividends among its shareholders. A follow-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 1611 million for the FY ending June 30, 2010. The respective ratios of banks' net profits to average equities, and to average assets, stood at 8.0 percent and 0.3 percent, respectively.

Consumer loans & real estate

loans for personal housing

11.2%

Loans to small-size economic

enterprises3.5%

Lending to corporates

85.3%

Bank's Contingent Liabilities and Loans

51


B- Banks for Which the FY Ends December 31 Bank's net profits for the FY ending December 31, 2010 registered LE 9062 million. The ratio of banks' net profits to average equities posted 16.2 percent, and to average assets 1.4 percent.

The main financial indicators of banks' financial positions at end of June 2011

are shown in the following table.

Net Profits of Commercial Banks Whose FY Ends December

7640

9062

0100020003000400050006000700080009000

10000

2009 2010

LE mn

Net Profits of Commercial Banks Whose FY Ends June

266

1611

0

200

400

600

800

1000

1200

1400

1600

1800

2009 2010

LE mn

52


Statement June 2011

Average 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


Chapter 3

Macroeconomic Developments

3/1- Gross Domestic Product (GDP) According to the data of the Ministry of Planning, real GDP growth at factor

cost noticeably declined to 1.9 percent in FY 2010/2011 from 5.1 percent in FY 2009/2010. The decline was largely a natural result of the weak performance of all economic 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 at constant 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, the GDP growth mounted to a positive 0.3 percent at factor cost, and 0.4 percent at constant and market prices (annual basis).

On the supply side, the domestic demand-driven sectors made a lower

contribution of 89.5 percent to GDP growth (against 90.2 percent in the previous FY). The underperformance was clearly seen in manufacturing (adding -0.1 point to GDP growth against 0.8 point), construction and building (0.2 point against 0.7 point), wholesale and retail trade (0.2 point against 0.6 point), and finance (nil against 0.3 point) and was less pronounced in agriculture and irrigation (0.4 point against 0.5 point), communications & IT (0.3 point against 0.5 point) and the general government (0.3 point against 0.4 point).


GDP Growth by Main Economic Sectors at Factor Cost and Constant Prices

(percentage point)

Domestic Demand-Driven Sectors 2010/2011 2009/2010

Sector

Growth Rate

(%)

Share in Real GDP Growth (1.9 percent)

Growth Rate

(%)


Agriculture, irrigation and fishing

2.7

0.4

3.5

0.5

Manufacturing -0.9 -0.1 5.1 0.8 Electricity 4.5 0.1 6.3 0.1 Construction and building

3.7

0.2

13.2

0.7

Transportation and storage

2.0

0.1

6.8

0.3

Communications 6.7 0.3 13.3 0.5 Wholesale trade 1.6 0.2 6.1 0.6 Finance 1.6 0.0 5.2 0.3 General government 3.7 0.3 4.2 0.4 Other sectors 0.2 0.4 Total 1.7 4.6

External Demand-Driven Sectors 2010/2011 2009/2010

Sector

Growth Rate (%)


Growth Rate (%)


Extractions 0.6 0.1 0.9 0.1 Suez Canal 11.5 0.3 -2.9 -0.1 Tourism -5.9 -0.2 12.0 0.5 Total 0.2 0.5

External demand-related sectors also underperformed; particularly tourism whose contribution to GDP growth fell from 0.5 point in the previous FY to a negative 0.2 point in the reporting year. However, the effect of such a fall was mitigated by the higher contribution of Suez Canal (0.3 point against a negative 0.1 point). 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 reversal from negative to positive contributions of wholesale and retail trade, transportation and storage, finance, public services and construction and building. Moreover, the negative contribution of manufacturing inched down from 1.8 percentage point to only 0.7 point, and that of tourism from -1.4 point to -0.8 point.

55


Public and private sectors added 1.9 percent to economic growth. The

contribution of the former remained broadly at the same level of 2009/2010 (1.1 point), while the latter added only 0.8 point (against 4.0 points). The decline in the share of the private sector mainly took place in the third quarter (-4.4 points - annual basis) and was most pronounced in manufacturing, tourism, wholesale and retail trade, construction and building, transportation, storage and IT, and finance.

Growth Rates during Q3 and Q4 of FY 2010/2011(Annual Basis)

2.5

-0.6-3.8

2.3 2.2 2.2 0.33.4 2.3 3.3

12.7

2.1 1.7 1.6 2.9

-19.5

2.8 3.2 2.1

-35-30-25-20-15-10-505

101520

Agr

icul

ture

, For

ests

& F

ishi

ng

Ext

ract

ions

Man

ufac

turi

ng

Ele

ctri

city

Wat

er

Sew

erag

e

Con

stru

ctio

n &

Bui

ldin

gs

Tran

spor

tatio

n &

Sto

rage

Com

mun

icat

ions

Info

rmat

ion

Sue

z C

anal

Who

lesa

le &

Ret

ail T

rade

Fina

nce

Insu

ranc

e

Soc

ial S

olid

arity

Tour

ism

Rea

l Est

ate

Pub

lic G

over

nmen

t

soci

al s

ervi

ces

%

Q4 (0.3%) Q 3 (-3.8%)

Contribution of The Private Sector to Real GDP Growth(at Factor Cost)

0.36

0.05

0.17

0.05

0.20

0.00

0.10

0.10

-0.14

0.16

-0.30

-0.40 -0.20 0.00 0.20 0.40 0.60 0.80

Agriculture, Forests & FishingExtractions

ManufacturingConstruction & building

Transportation & storageCommunications

Wholesale & Retail TradeFinance

TourismReal Estate

Education, health & other services

Fiscal Year 2010/2011 (0.8 percetange point)Fiscal Year 2009/2010 (4.0 percetange point)


On the demand side, the slowdown in economic growth was primarily ascribed

to the lower share of capital formation (including the change in stock) that registered a negative 0.8 point (against a positive 1.6 point). Another factor at work was the decline in the share of net external demand (exports of goods and services less imports of goods and services) that shifted from a positive 0.1 point to a negative 1.0 point. However, the rise in the share of private consumption (3.2 points against 2.9 points) made up for the weak contributions of the above items.

Contribution of The Public Sector to Real GDP Growth(at Factor Cost)

0.03

-0.01

0.08

0.02

0.02

0.03

0.07

0.35

0.01

0.04

0.01

0.15

0.32

-0.20 -0.10 0.00 0.10 0.20 0.30 0.40

Extractions Manufacturing

ElectricityWater

Construction & buildingTransportation & storage

CommunicationsSuez Canal

Wholesale & Retail TradeFinance

InsuranceSocial solidarity

General Government

Fiscal Year 2010/2011 (1.1 percetange point)Fiscal Year 2009/2010 (1.1 percetange point)

Share of Demand Components in Real GDP Growth Rate

3.63.4

0.1

-1.0

1.6

-0.8-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2010/20112009/2010

Net ExportsInvestmentConsumption

(Per

cent

age

poin

t)

57


Growth Rates of Demand Components and Their Share in Real GDP Growth

. Share in GDP Growth

(percentage point) Growth Rates

(%) 2010/11 2009/10 2010/11 2009/10

1.8 5.1 1.8 5.1 Real GDP Growth (1+2) 2.8 5.0 2.7 4.9 1-Domestic Demand (A+B) 3.6 3.4 4.4 4.2 A- Final Consumption 3.2 2.9 4.5 4.1 Private 0.4 0.5 3.8 4.5 Public

-.0.8 1.6 -4.4 8.0 B- Capital Formation (Including Change in the Stock)

-1.0 0.1 -43.2 -5.2 2- Net External Demand

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 percent increase a year earlier. The slowed investments were mainly attributed to the lower contribution of the private sector (5.8 points against 16.5 points) especially of oil & gas, communications & IT, manufacturing, and real estates. In addition, the negative contribution of the public sector aggravated (11.4 points against 8.8 points). The decline in investment growth was largely caused by the sectors of electricity; transportation & storage; and water & sanitation. However, contribution of natural gas, communications and IT, real estate and manufacturing to investment growth increased.

Contribution of the Public Sector in the Real Growth of Investment

-0.150.01

-0.13

-1.09

-0.77

-2.090.84

0.100.090.000.17

-0.69-0.42-0.50

-0.94-5.80

-0.06

-0.03

-0.02

0.12

-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

Agriculture, Irrigation & Reclamation Crude Oil

Natural Gas Oil Refining

Other ManufacturingElectricity

Water Construction & Building Transportation & Storage

Communications Suez Canal

Wholesale & Retail TradeFinancial Intermediaries

Tourism Real Estate

Educational Services Health Services

DrainageOther Services

Others *

Fiscal Year 2010/2011 (-11.4 percentage point)Fiscal Year 2009/2010 (-8.8 percentage points) * Includes price differences & settlements


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 and building, 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 were relatively stable in Q4 2010/2011 (April/June), as compared with the preceding quarter (January/March 2011). The annual growth rate of the labor force posted 0.5 percent 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 percent at end of March). The number of unemployed individuals accelerated by some 760 thousand or 32.4 percent in the reporting year. The rise was attributable to the increase in the number of unemployed males by 779 thousand, curbed by the decline in the number of jobless females by 19 thousand.

9.36% 9.40% 9.12% 8.96% 8.94% 8.90%

11.90% 11.80%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Unemployment Labor Force Employment2009/2010 2010/2011

Labor Force & Employmet Indicators

-0.20-7.91

-2.970.28

0.030.000.00

0.64-0.50

0.140.00

1.910.00

0.655.89

0.400.39

0.00

8.23-1.20

-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

Agriculture, Irrigation & Reclamation Crude Oil

Natural Gas Oil Refining

Other ManufacturingElectricity

Water Construction & Building Transportation & Storage

Communications Suez Canal

Wholesale & Retail TradeFinancial Intermediaries

Tourism Real Estate

Educational Services Health Services

DrainageOther Services

Others*

Fiscal Year 2010/2011 (5.8 percentage point)Fiscal Year 2009/2010 (16.5percentage points)

Contribution of the Private Sector in the Real Growth of Investment

* Includes price differences & settlements

59

Central Bank of Egypt – Annual Report 2010/2011 3/2-Inflation A - Consumer Price Index (CPI) During FY 2010/2011, the annual headline CPI inflation (urban) inched up, to post 11.8 percent in June 2011 (from 10.1 percent in June 2010). The rise in the prices of tobacco and narcotics (69.9 percent, against nil) was a main cause for the increase in headline inflation, contributing 1.5 percentage point (against nil). The decision to raise taxes on tobacco (40-50 percent) effective as of the first of July 2010 was behind the price hike in tobacco. The contribution of food and non-alcoholic beverages rose as well to 7.8 percentage points (from 7.1 percentage points), with a relative weight of 39.9 percent of CPI. Similarly, the share of education upped to 1.1 point, from 0.4 point. Source: CAPMAS.

The larger share of food and non-alcoholic beverages in headline inflation is associated with the 19.0 percent rise in their prices in the reporting year (from 18.6 percent a year earlier), affected by world price hikes of food items (32.9 percent) in the year ending June 2011. The intensification of the annual inflation of this group was held back by the noticeable moderation in world food prices in Q4.

Annual CPI and The Price Index of Food and Non-Alcoholic Beverages (Urban)

10.1 10.4 10.9 11.0 11.010.2 10.3 10.8 10.7

11.5 12.1 11.8 11.8

0

4

8

12

16

20

24

28

Jun-2010 Jul Aug Sep Oct Nov Dec Jan-2011 Feb Mar Apr May Jun-2011

%

All Items Food and Non-Alcoholic Beverages


Source: IMF. The pickup in the share of food and non-alcoholic beverages was ascribed to the higher contributions of most food items, especially bread and cereals (1.8 percentage 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 point against 2.3 points) and sugar (0.2 point against 0.3 point).

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 helped reign in the rise of inflation was the slowdown in real GDP growth (1.9 percent at factor cost).

Change in The International Prices of Basic Foodstuffs

-6.0-4.0-2.00.02.04.06.08.0

10.012.014.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009/2010 2010/2011

%

Contribution of Main Items of Food in Headline Inflation (Annually)FY

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

2.7

Meat & Poultry Oils & Fats Fruits Bread & cereals Vegetables Sugar

Percentage point

2009/20102010/2011

61


The following table illustrates the shares of CPI groups (urban) in headline inflation during the periods of review and comparison:

Inflation in FY Share in Headline Inflation in FY

(%) (Percentage Point)

Main CPI Items

2009/2010 2010/2011 2009/2010* 2010/2011 General Index 10.1 11.8 10.1 11.8 Food and non-alcoholic beverages 18.6 19.0 7.1 7.8 Alcoholic beverages, tobacco and narcotics 0.0 69.9 0.0 1.5 Clothing and footwear 0.6 2.2 0.0 0.1 Housing, water, electricity, gas & fuel 2.9 1.1 0.6 0.2 Furnishings, household equipment and routine maintenance 3.3 2.5 0.1 0.1 Health care 0.3 1.9 0.0 0.1 Transportation 1.0 1.0 0.1 0.1 Communications -0.2 0.1 0.0 0.0 Culture and recreation 2.9 5.9 0.1 0.2 Education 9.4 24.3 0.4 1.1 Restaurants and hotels 4.5 12.1 0.2 0.5 Miscellaneous 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 average in the reporting year (against 0.7 percent in the year of comparison). The monthly inflation recorded its highest level in July and August 2010 (2.5 percent and 2.9 percent, respectively), on the back of the decision of raising taxes on tobacco, along with the price hikes of food and non-alcoholic beverages in these two months. Nevertheless, inflation started to recede since September 2010, recording a negative rate in November and December 2010 (the lowest level throughout the reporting period), showing almost the same level as the corresponding months a year earlier.

Monthly Inflation Rate According to CPI (Urban)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jun-20

09 Jul

Aug Sep OctNov Dec

Jan-20

10 Feb

Mar AprMay

Jun-20

10 Jul

Aug Sep OctNov Dec

Jan-20

11 Feb

Mar AprMay

Jun-20

11

%


B - Producer Price Index (PPI) Taking an upward trend similar to the CPI, the annual PPI inflation accelerated to 19.4 percent (against 8.6 percent in the previous FY).

The rise in PPI inflation was ascribed above all to the higher contribution of mining and quarrying (7.3 points against 2.0 points), in view of the significant increase in its inflation rate (36.3 percent from 9.8 percent), particularly due to the higher share of crude oil (11.2 points against 3.0 points). Also, the share of agriculture and fishing inched up to 7.9 points from 3.7 points, mainly because of the larger 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 (0.5 point against a negative 0.1 point).

The higher inflation was also brought about by the pickup in the contribution of the manufacturing group, adding 3.7 points against 2.5 points. This was attributed to the rise in the share of the subgroup of iron and steel industry (1.1 point against 0.8 point), fats, and oils (0.3 point against nil). Add to this, the increased contribution of food 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 in headline inflation during the years of reporting and comparison:

Annual Inflation Rate According to PPI (2004/2005 = 100)

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

Jun-2009

JulAug

Sep OctNov

Dec

Jan-201

0Feb

MarApr

May

Jun-2010

JulAug

Sep OctNov

Dec

Jan-201

1Feb

MarApr

May

Jun-2011

%

63


Share of PPI Groups in Headline Inflation

(2004/2005=100) Inflation

during the Period Share in Headline

Inflation (%) (Percentage Point) Main PPI Groups

July/June July/June 2009/2010 2010/2011 2009/2010 2010/2011 General Index 8.6 19.4 8.6 19.4 1-Agriculture, Forestry and Fishing, of which:

11.6 23.9 3.7 7.9

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 0.0

2-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 0.0

3-Manufacturing, of which: 6.9 10.3 2.5 3.7 Processed food products, of which:

11.8 12.8 1.0 1.1

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 1.1

4-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 0.0

5-Water Supply Activities 5.6 0.0 0.1 0.0 6-Transportation and Storage,

of which: 0.5 2.0 0.0 0.0

Land transport 3.5 0.0 0.0 0.0 7- Food and Accommodation Services, of which:

-3.5 13.1 -0.1 0.5

Meal serving services in limited service facilities 5.7 17.0 0.0 0.1

8-Information and Communications 0.0 0.0 0.0 0.0

Source: CAPMAS.

64 Central Bank of Egypt – Annual Report 2010/2011 3/3- 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 of GDP), while revenues declined by 3.2 percent to LE 259.6 billion (18.8 percent of GDP).

Accordingly, the overall budget deficit widened by 33.0 percent, to register LE 130.4 billion, constituting 9.5 percent of GDP (against some LE 98.0 billion or 8.1 percent of GDP a year earlier). The deficit (LE 130.4 billion) is a 19.5 percent above the estimated figure for the whole FY.

To address the consequences of the Egyptian revolution, the government took a

number of measures regarding both expenditures and revenues. On the expenditures side, the government established a compensation fund for individuals and small and micro enterprises that were negatively affected by the events; appointed, on a permanent basis, some of the temporary-contract employees; increased the number of families eligible for the social solidarity pension; disbursed exceptional pensions and compensations for martyrs' families; and established an additional budget appropriation of LE 10.0 billion to satisfy the basic requirements of subsidizing food commodities during the year under review. On the revenues side, the most important measures were: allowing payment in installments of the sales taxes in Jan. and Feb. to provide the required liquidity for projects; and the prompt release of merchandise imports without paying the customs duties mandated for Jan. and Feb. 2011 (to be paid later) to ensure the availability of staple food items. In addition, the government exempted those with overdue insurance premiums from delay fines.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

Revenues Expenditures Deficit

Ratios of Expenditures, Revenues & Overall Deficit / GDP

%

65


Hereunder is a follow-up of the execution of the consolidated fiscal operations of the general government in FY 2010/2011, according to the preliminary actual data of 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 revenues shrank by some LE 8.5 billion or 3.2 percent in the reporting year, to record LE 259.6 billion (18.8 percent of GDP). The LE 12.8 billion retreat in the property income of EGPC, and in other miscellaneous revenues was principally responsible for the decline. Other factors at work were the drop in customs duties (by LE 0.8 billion), in sale 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 in external grants (by LE 2.6 billion).

The decline would have been larger but for the rise in collected taxes on incomes and profits by LE 13.0 billion or 17.0 percent, on goods and services by LE 8.8 billion or 13.1 percent, and on property by LE 363 million or 4.1 percent.

The Relative Structure of Tax Revenues of the Budget Sector 2010/2011

Taxes on International Trade 7.2%

Other Taxes 6.4%

Taxes on Goods & Services 39.6%

Taxes on Income 46.8%

Total Revenues ,Tax Revenues & Property Income

0 50 100 150 200 250 300

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

Total Revenues Tax Revenues Property Income

(LE bn)


As indicated by preliminary actual figures, expenditures increased by LE 26.1 billion or 7.1 percent above the previous fiscal year, registering LE 392.1 billion or 28.5 percent of GDP. The increase stemmed mainly from subsidies that rose by LE 17.5 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 of employees augmented by LE 9.7 billion or 11.4 percent to LE 95.1 billion, draining 36.6 percent of public revenues and constituting about 26.8 percent of current government spending.

Interest payments on public debt – domestic and external – accelerated by LE

8.7 billion or 12.1 percent to LE 81.1 billion, absorbing 31.2 percent of public revenues, and reflecting as such the high burden of debt service. However, some items decreased, mainly investments of infrastructure projects that markedly fell by LE 10.4 billion or 21.5 percent to LE 38.0 billion, as construction of some projects have been suspended since the outbreak of the revolution. In addition, purchases of goods and services went down by LE 4.3 billion or 15.2 percent under the current circumstances.

The Relative Structure of Expenditures 2010/2011

Wages & Compensations of Employees

24.2%

Investments 9.7%

Interest 20.7%

Subsidies, Grants & Social Benefits

31.3%

Purchases of Goods & Services

6.1%

Other Expenditures 8.0%

67


Summary of Consolidated Fiscal Operations of the State Budget (LE mn)

2009/10 2010/11 2009/10 2010/11 Revenues Actual Preliminary Actual

Expenditures Actual Preliminary

Actual Total Revenues 268114 259617 Total Expenditures 365987 392097 Tax revenues 170494 191626 Compensations of employees

(including wages) 85369 95082 Taxes on income & profits 76618 89642 Purchases of goods &

services 28059 23785 Taxes on property 8770 9133 Interest 72333 81081 Taxes on goods & services 67095 75892 Subsidies, grants & social

benefits 102975 122834 Customs 14702 13857 Subsidy 93570 111022 Other taxes 3309 3102 Grants 4380 5314 Grants 4332 1723 Social benefits 4483 6033 Other revenues 93288 66268 Others 542 465 Property income 54570 41803 Other expenditures 28901 31363 Proceeds of selling goods & services 17212 15160 Defense 23453 26484 Financial investments 8873 6755 Other 5448 4879 Others 12633 2550 Purchases of non-financial

assets (investments) 48350 37952

Against this background, the budget showed a cash deficit of LE 132.5 billion

or 9.6 percent of GDP. By adding the net acquisition of financial assets (a negative LE 2.1 billion) to the cash deficit, the overall deficit would post LE 130.4 billion or 9.5 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 of LE 74.0 billion, or 56.4 percent of available finance) were mainly used to cover the overall budget deficit, along with some miscellaneous repayments. External sources provided 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 budget sector, collected revenues would surge by LE 36.7 billion to LE 296.3 billion (21.5 percent of GDP). Likewise, public expenditures would rise by LE 38.5 billion to LE 430.6 billion (31.3 percent of GDP).

Cash Deficit & Overall Deficit /GDP

6.0

7.0

8.0

9.0

10.0

2007/2008 2008/2009 2009/2010 2010/2011

Cash Deficit Overall Deficit

%


Accordingly, the cash deficit of the consolidated fiscal operations of the general government reached LE 134.3 billion in the reporting year. By adding the net acquisition of financial assets (a negative LE 4.3 billion) to that deficit, the overall deficit 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

(Actual ) (Preliminary

Actual ) Total Revenues 303361 296341 Total Expenditures 396768 430641 Cash Deficit 93407 134300 Net acquisition of financial assets 5479 -4262 Overall deficit 98886 130038 Financing sources 98886 130038 Domestic finance 102415 135560 Banking finance 39380 97625 Non-banking finance 63035 37935 Blocked Account Used in Amortizing Part of CBE Bonds 0 0 External borrowing 2458 5024 Arrears 0 0 Others 273 8030 Financing Effects for Eliminations -1 -1 Exchange rate revaluation 1328 3945 Net privatization proceeds 425 22 Difference between treasury bills face value & present value -227 -7419 Foreign Debt Reclassification Differences and Related FX Differences 0 0 Discrepancy -7785 -15123

The overall deficit of the consolidated fiscal operations of the general

government was mainly financed from local sources, while external sources provided no 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 at the CBE.

Data indicated that in the second half of the year (Jan./June 2011) the BOP recorded 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 in Egypt and the Arab region that took their toll on tourism revenues and foreign investment flows to Egypt.

69


There are two basic factors that contributed to the overall deficit (US$ 9.8 billion): the current account deficit which retreated by 35.9 percent to record US$ 2.8 billion (against US$ 4.3 billion a year earlier), and the capital and financial account that unfolded a net outflow of US$ 4.8 billion (against a net inflow of US$ 8.3 billion).

The decline in the current account deficit was brought about by the fall in trade deficit, the increase in net unrequited transfers, and the contraction in services surplus.

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$ 27.0 billion, and a comparatively moderate rise in merchandise imports by 3.6 percent to US$ 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$ 23.6 billion). 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 49.5 percent 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$ 7.2 billion) 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 the meantime, government expenditures fell by 27.9 percent to US$ 1.1 billion, travel expenditures by 9.2 percent to US$ 2.1 billion, and other services payments by only 0.5 percent to stand at US$ 2.9 billion.


Net unrequited transfers surged by 25.6 percent to US$ 13.1 billion, fueled by the increase in net private transfers by 30.2 percent to US$ 12.4 billion (against US$ 9.5 billion), recording its highest rate of increase in Q4. However, net official transfers declined by 21.1 percent to only US$ 752.9 million, following the fall in cash grants to the Egyptian government. It is worthy to note that remittances of Egyptians working abroad represented almost 99.0 percent of private transfers.

Capital and financial account realized a net outflow of US$ 4.8 billion (against a net inflow of US$ 8.3 billion a year earlier). The noticeable shift was due to the fact that portfolio investments in Egypt reversed from a net inflow of US$ 7.9 billion to a net outflow of US$ 2.6 billion, of which US$ 3.1 billion were foreigners’ investments in Egyptian TBs (outflows). In addition, net FDI in Egypt plunged by 67.6 percent, to post as low as US$ 2.2 billion (compared with US$ 6.8 billion).

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 GDP

estimates and the main changes in the BOP items during FY 2010/2011 and the previous FY:

Development of Unrequited Transfers

2.8

4.0

3.23.3

2.8

1.92.5

3.1

1.0

2.0

3.0

4.0

5.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009/2010 2010/2011

US$ bn

Development of Foreign Investment in Egypt

1.7 0.91.7 2.4

1.6 0.7

-0.2

0.1

-1.6

-5.5

-1.3

1.2 0.4

5.5

0.8

5.9

-6-5-4-3-2-10123456

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009/2010 2010/2011

US$ bn

Net FDI in Egy pt Net Portf olio Inv estment in Egy pt

71


Balance of Payments Indicators

FY (%) 2009/2010 2010/2011 Trade 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 -10.1 Services 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 4.5

Transfers: - 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 95.7 Capital 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 4.9

3/4/1- 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 of the 13.1 percent increase in export proceeds to US$ 27.0 billion (oil exports rose by 18.3 percent and non-oil exports by 9.1 percent). Imports increased as well, albeit at a lower pace than exports (3.6 percent), to register US$ 50.8 billion, reflecting the rise of 15.2 percent in oil imports and the fall of 2.3 percent in non-oil imports.


Against this background, the trade deficit narrowed by 5.3 percent, posting US$ 23.8 billion (against US$ 25.1 billion). 3/4/1/1- Distribution of Merchandise Exports

Merchandise exports rose by 13.1 percent to US$ 27.0 billion, as a result of the pickup in the exports of semi-finished goods by 28.1 percent, mineral fuels, oils and products by 18.5 percent, raw materials by 11.2 percent and finished goods by 7.7 percent. The following chart shows the contribution of the different groups of merchandise exports to total exports.

The growth of export proceeds was traced to the rise in crude oil and oil

products, fertilizers and cotton textiles, supported by international price hikes.

Total Volume of Trade

-60.0-40.0-20.0

0.020.040.060.080.0

100.0

2008/2009 2009/2010 2010/2011

US$ bn

Total exports Total importsTrade volume Trade balance

Proceeds of Merchandise Exports by Degree of Processing

0

2

4

6

8

10

12

14

Fuel, mineral oils& products

Raw materials Semi-finishedgoods

Finished goods

US$

bn

2008/2009 2009/2010 2010/2011

73


Export Groups by Degree of Processing A) Mineral Fuels, Oils and Products:

Exports of this group moved up by 18.5 percent to US$ 12.6 billion (against US$ 10.6 billion). The public sector shared with 85.7 percent of the total exports of this 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 fruits for 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 other groups (28.1 percent), posting US$ 2.1 billion (against US$ 1.6 billion). Again, the private sector was the main exporter (79.0 percent), followed by the investment sector (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 and oils and products and carbon; as well as dyeing and tanning extracts.

Proceeds of Merchandise Exports US$ 27.0 bn

Mineral fuels and oils 46.7

percent

Raw materials 5.2 percent

Semi-finished goods 7.7 percent

Finished goods 40.2 percent


D) Finished Goods:

Exports of finished goods mounted by 7.7 percent to US$ 10.9 billion (from US$ 10.1 billion). The private sector was in the lead (86.5 percent), and the investment sector came next (10.4 percent) followed by the public sector (3.1 percent).

The key exports of this group were fertilizers; ready-made garments; cotton

textiles; iron and steel products; pharmaceuticals; miscellaneous edible preparations; soap, detergents and artificial waxes; aluminum articles; paper, cardboard paper and articles thereof. 3/4/1/2- Distribution of Merchandise Imports:

Imports increased by 3.2 percent to US$ 50.8 billion in FY 2010/2011 (against US$ 49.0 billion in the previous FY). Imports of mineral fuels, oils and products rose by 21.9 percent, raw materials by 32.6 percent, investment goods by 4.0 percent and consumer goods by 0.2 percent. In contrast, imports of intermediate goods fell by 2.8 percent. 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 car spare parts and accessories.

Import Payments by Degree of Use

Merchandise Import Payments US$ 50.8 bn

Mineral fuels and oils 9.2 percent

Raw Materials 14.5 percent

Intermediate goods 31.1 percent

Investment goods 20.5 percent

Consumer Goods 24.0 percent

Payments for Merchandise Imports by Degree of Use

-18.0-16.0-14.0-12.0-10.0-8.0-6.0-4.0-2.00.0

Fuel, mineral oils &products

Raw materials Intermediate goods Investment goods Consumer goods

US$

bn

2008/2009 2009/2010 2010/2011

75


A) Mineral fuels, Oils and Products:

Imports of mineral fuels, oils and products increased by 21.9 percent to US$ 4.6 billion (from US$ 3.8 billion), of which oil products constituted 86.6 percent. The public sector accounted for 69.3 percent of the total imports of this group, followed by 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 during the reporting year (against US$ 5.5 billion in the year before). The private sector imported 55.8 percent of the total, while the public sector came next with 32.3 percent, 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 the total, followed by the investment sector (9.3 percent) and the public sector (5.7 percent).

The major imports were iron and steel products; car parts, spare parts and

accessories; organic and inorganic chemicals; animal and vegetable fats, greases and oils and products; paper, cardboard paper and articles thereof; and wood and its articles. 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 78.0 percent, the public sector ranked second with 11.3 percent and lastly came the investment 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 or line telegraphy; pumps, fans and articles thereof; optical photographic, cinema-tographic and medical appliances and parts.


E) Consumer Goods:

Imports of consumer goods slightly rose by 0.2 percent to US$ 12.3 billion in the reporting year, compared to US$ 12.2 billion a year earlier. The rise reflected the increase 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$ 2.9 billion. The private sector accounted for 87.2 percent of the total. The investment sector 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; and

household refrigerators and freezers. On the other hand, the most prominent imports of non-durable goods were pharmaceuticals; meat; miscellaneous edible preparations; ready-made clothes; edible vegetables, roots and tubers; cotton textiles; and dairy products, 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. The public sector came next (25.8 percent) followed by the investment sector (9.8 percent). A) The Private Sector:

The volume of trade of the private sector grew by 6.2 percent to US$ 50.1 billion; 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 goods represented 74.9 percent. The main exports were fertilizers; ready-made garments; cotton textiles; chemicals; iron and steel products; pharmaceuticals; cast iron and semi-finished goods; soap, detergents and artificial waxes; and paper, cardboard paper and articles thereof.

Private sector64.4%

Investment sector9.8%

Public sector25.8%

Relative Structure of The Volume of Trade by Economic Sector FY 2010/2011

77


Likewise, its imports rose by 5.0 percent to US$ 37.5 billion (73.9 of total imports), against US$ 35.7 billion. Intermediate goods made up 35.8 percent and consumer goods 28.5 percent. Foremost of the imports came iron and steel; car parts, spare parts and accessories; pharmaceuticals; organic and inorganic chemicals; cranes and 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$ 20.1 billion (exports represented 57.0 percent and imports 43.0 percent). Exports rose by 5.0 percent, scoring US$ 11.4 billion (42.4 percent of total exports), compared with US$ 10.9 billion in the previous year. It is noteworthy that mineral fuels, oils and products represented 94.3 percent of the exports of this sector. The most important exports were crude oil and products; aluminum products; cotton; cotton yarn; cast iron and semi-finished products; coal; aluminum; and cotton textiles.

On the other hand, imports of this sector declined by 1.4 percent to US$ 8.6

billion (17.0 percent of total imports) against US$ 8.8 billion. Mineral fuels, oils and products; and raw materials accounted for 37.3 percent and 27.5 percent, respectively, of public sector's imports. Salient of its imports were crude oil and products; wheat; animal and vegetable fats, greases and oils and products; electric motors, generators and transformers and parts thereof; railway and tramway locomotives 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 to US$ 7.6 billion, of which exports made up 39.5 percent and imports 60.5 percent. Its exports 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; and ceramic 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 24.2 percent of its total imports). Major imports were animal and vegetable fats, greases and oils and products; cranes and bulldozers and parts thereof; wheat; spare parts and accessories of cars; oil and products; iron and steel products; and plants and vegetables.


3/4/1/4- Geographical Distribution of Merchandise Transactions Statistics revealed an uptrend in Egypt's trade with all groupings (except for the

United States of America and the Russian Federation). Most of the increase (32.4 percent) was in the trade with Italy, Switzerland, the United Kingdom, Germany, and China. A) EU Countries:

The volume of trade between Egypt and the EU countries rose by 12.0 percent to

US$ 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

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%

Russian Federation & C.I.S 1.3%

Aِfrican (Non-Arab) Countries 1.5%

Australia and Other Countries & Regions 3.8%

79


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 by

29.2 percent, registering US$ 6.7 billion. B) Asian (Non-Arab) Countries:

The volume of trade between Egypt and Asian (non-Arab) countries scaled up by 6.9 percent, amounting to US$ 14.9 billion, due to the confluence of the following:

− 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.


− 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$ 9.6 billion, 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 Egypt

and the USA rose to US$ 2.4 billion in the reporting year, compared to US$ 0.9 billion a year earlier.

E) Other European Countries:

The volume of trade with the other European countries edged up by 0.5% to US$ 7.1 billion, because of:

81


− 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 in

the reporting year. F) Australia and Other Countries and Regions:

The volume of trade with Australia and other countries and regions decreased by 7.9 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 the

reporting year.


G) African (Non-Arab) Countries: Trade exchange between Egypt and the African (non-Arab) countries stepped up

by 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 (falling

by 54.0 percent), to register US$ 82.4 million in 2010/2011 (against US$ 179.1 million 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 the

reporting year, against US$ 1.2 billion.

83


3/4/1/5- Contribution of Main Commodities to the Volume of External Trade:

Trade of all merchandise groups stepped up, with the exception of machinery and electric appliances. The following chart reveals the volume of trade of all merchandise groups and their respective shares in the FY 2010/2011.

Volume of Trade US$ 77.8 bn

Oil & Products 23.2%

Foodstuffs 8.5%

Cereals 5.5%

Cotton & Textiles 5.9%

Exports 12.1 bn

Imports 5.9 bn

Exports 1.2 bn

Imports 5.4 bn

Imports 4.1 bn

Exports 0.2 bn

Exports 2.3 bn

Chemicals 9.7% Imports 4.7 bn

Exports 2.9 bn

Machinery & Electric Appliances 7.9% Imports 5.4 bn

Exports 0.8 bn

Base Metals & Products 9.3% Imports 5.1 bn

Exports 2.1 bn

Vehicles & Means of Transportation 8.1%

Other Goods 21.9%

Exports 0.7 bn

Imports 5.6 bn

Imports 12.3 bn

Exports 4.7 bn

Imports 2.3%


3/4/2- Balance of Services and Transfers A. Balance of Services:

Services surplus declined by 23.8 percent, reaching US$ 7.9 billion in the reporting 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: - 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.

0.9 0.5

12.2

3.5

30.6

49.2

15.7

1.9

48.4

36.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Transportation Travel Investment Income GovernmentReceipts

Other Receipts

%2009/2010

2010/2011

Services Receipts Items as a Percentage of Total Services Receipts

85


- 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

events that Egypt and the Arab countries had been through in 2010/2011, Suez Canal earnings remained broadly immune to such events, registering US$ 1.23 billion in the third quarter of the year (against US$ 1.1 billion in the corresponding quarter). They even rose to US$ 1.3 billion in the fourth quarter (against US$ 1.2 billion in the corresponding quarter).

- 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:-

- 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.

0.80.6

0.8

1.41.51.3 1.2 1.3

1.5

0.50.50.5 0.5 0.5 0.5 0.5

00.20.40.60.8

11.21.41.6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009/2010 2010/2011

%

Travel Suez Canal

Development of Main Items of Services Receipts as a Percentage of GDP

Services Payments Items as a percentage of Total Services Payments

11.67.9

39.3

9.3

17.622.2 20.9

46.2

15.19.9

0.05.0

10.015.020.025.030.035.040.045.050.0

Transportation Trav el Inv estmentIncome

Gov ernmentPay ments

Other Pay ments

%

2009/2010

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 unrequited transfers accelerated by 25.6 percent to US$ 13.1 billion, due to the 30.2 percent increase in net private transfers, to register US$ 12.4 billion (compared with US$ 9.5 billion). Of total private transfers, remittances of Egyptians working abroad accounted for some 99 percent. Net official transfers, however, retreated by 21.1 percent to merely US$ 752.9 million, under lower cash grants to the Egyptian government.

Net Current Transfers (Unrequited) (US$ mn)

Change 2009/2010 2010/2011 Value % Net Current Transfers (Unrequited) 10463.4 13136.8 2673.4 25.6 1- Official Transfers (Net) (a+b-c) 954.0 752.9 -201.1 -21.1 a- Inward cash grants 563.6 532.9 -30.7 -5.4 b- Other inward grants 479.3 249.6 -229.7 -47.9 c- Official outward transfers 88.9 29.6 -59.3 -66.7 2- Private Transfers (Net) (a+b-c) 9509.4 12383.9 2874.5 30.2 a- Workers' remittances 9753.4 12592.6 2839.2 29.1 b- Other transfers 64.0 85.6 21.6 33.8 c- Private transfers abroad 308.0 294.3 -13.7 -4.4

1.2

1.5

0.8

1.31.3

1.5

1.3

0.9

0.60.70.80.9

11.11.21.31.41.51.6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2009/2010 2010/2011

%

Remittances of Egyptians Working Abroad as a Percentage of GDP

87


Against this background, the current account deficit contracted by 35.9 percent to US$ 2.8 billion (from US$ 4.3 billion) owing to the pickup in current receipts by US$ 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 latter went up by US$ 2.6 billion or 4.1 percent, to post US$ 64.8 billion (against US$ 62.2 billion).

The following chart highlights current receipts and payments in both the reporting year and year of comparison.

3/4/3- Capital and Financial Account

The capital and financial account revealed a net outflow of US$ 4.8 billion in 2010/2011 (against a net inflow of US$ 8.3 billion a year earlier), as an outcome of the following developments:

1- Portfolio investment in Egypt∗ shifted

from a net inflow of US$ 7.9 billion to a net outflow of US$ 2.6 billion, of which, US$ 3.1 billion were foreigners' net transactions on Egyptian TBs (outflows), US$ 316.7 million were their net transactions on shares (inflows), and US$ 211.0 million were net transactions on other Egyptian bonds and notes (inflows).

∗ Representing foreigners' dealings (net) in securities and Egyptian bonds and notes.

-13.2

-49.0

10.5

23.623.9

-14.0

13.121.9

27.0

-50.8-60-55-50-45-40-35-30-25-20-15-10-505

1015202530

MerchandiseExports

Services Receipts UnrequitedTransfers (Net)

MerchandiseImports

Services Payments

US$ bn 2009/20102010/2011

Current Receipts & Current Payments

Development of Foreign Investment In Egypt

2.2

6.88.1

-2.6

7.9

-9.2-10-8-6-4-202468

101214

2008/2009 2009/2010 2010/2011

US$ bn

Net FDI in EgyptNet Portfolio Investment in Egypt


Analyzing such flows showed that they reversed from a net inflow of US$ 4.5 billion in the first half of the year (July/December 2010) to a net outflow of US$ 7.1 billion in the second half (January/June 2011), as foreigners sold their holdings of securities (especially Egyptian TBs which recorded net sales of US$ 6.1 billion) on the 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 each sector in total FDI in Egypt.

(US$ mn) FY Sector 2009/2010 Share

(%) 2010/2011 Share

(%) Total FDI inflows 11008.1 100.0 9574.4 100.0 Manufacturing 456.3 4.1 803.9 8.4 Agriculture 261.6 2.4 30.4 0.3 Construction 303.8 2.8 108.8 1.1 Finance 873.9 7.9 114.0 1.2 Services 382.6 3.5 207.2 2.2 Tourism 246.9 2.2 158.0 1.7 Communications and IT 62.8 0.6 7.0 0.1 Real estate 305.3 2.8 134.0 1.4 Petroleum 7577.4 68.8 7014.7 73.3 Undistributed 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 investor's equity participation shall be at least 10 percent of the capital of any enterprise..

89


3- 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 strengthen supervision over non-banking financial markets and protect dealers’ rights. To this end, the EFSA proposed an amendment of certain provisions of the Executive Regulations of the Capital Market Law No. 95 of 1992, to revise mutual funds regulations, in accordance with the international best practices. The amendments focused on shortcutting the procedures of establishing a fund to just one step; and obliging management services companies to seek the assistance of professional asset appraisers. The EFSA also issued the principle standards for professional performance to ensure the integrity and independence of the companies licensed to act as financial advisers and render appraisal services. The proposed standards include the following: (a) no company shall be entitled to practice the activity of financial consultancy on securities without obtaining a practice-precedent license from the EFSA; (b) the company shall prepare a general guideline describing the procedures followed thereby for rendering financial consultancy; (c) the company, in the course of dealing with customers, shall avoid granting privileges, incentives or information to certain customers and denying the same to the others; (d) the company shall set an internal control system preventing analysts from carrying out any appraisals with false or misleading results; (e) the company shall make sure that no common interest, or conflict of interests, may exist between the company and the applicant or the appraised company; and (f) the company shall immediately disclose to the EFSA any suspicion of conflict of interests between the company and the other appraised company or any of its affiliates.

A number of laws and legislations regulating the capital market were revised

during the reporting year, and amendments were made to listing and disclosure rules, as the EFSA announced the regulations governing the application of Article (16) of the rules of listing and delisting of securities on the Egyptian Exchange. The

* Source: EFSA - monthly reports of the EGX.


regulations state that any company practicing activity in the market has to provide the EFSA 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 of a material event that should be disclosed, without prejudice to the confidentiality of the company’s business.

Aware of the importance of microfinance companies as a key ingredient of

financial markets, the EFSA proposed a draft to regulate their activities and set controls for the selection of borrowers and monitoring and collection of loans; the permissible financial services and operational activities; rules of ownership and governance, and principles for the protection of the entities operating in this field according to international best practices.

To protect the interests of brokerage firms, Ministerial Decree No. 345 was

issued on 10 March 2011, amending some provisions of the Executive Regulations of the Capital Market Law regarding the modification of the percentages of buying securities on margin. Accordingly, the liabilities percentage that must be reduced by a debtor, 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 on margin at the end of each business day, according to their market value. The customer's liabilities percentage of 70 percent that necessitates taking procedures to sell his shares and liquidate his warranties, was also modified to be 80% of the market value of securities.

The Ministerial Decree No. 355 was issued on 13 March 2011, amending some

provisions of the Decree establishing a fund for safeguarding securities' dealers against non-commercial risks arising from exceptional circumstances and emergencies. By virtue of this amendment, the fund may form a portfolio (limited to 10% of its resources) to face any slump in the prices of the securities listed on the Exchange, by purchasing securities to strike some balance between supply and demand in the market, yet without detriment to the fund’s ability to provide adequate liquidity as may be required to meet any compensation requests. The fund may also step in, in exceptional circumstances and emergencies, to provide interest bearing loans to its members, to support their market activities, with a maximum limit of 20 percent of the fund’s financial resources, according to the rules to be set by the fund's board 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 CMA's index moved down by 36.0 percent, posting 850.5 points at end of June, due to the disruptive effects of the revolution. However, EGX 70 (comprises small and medium enterprises) 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


The third quarter of FY 2010/2011 (January/March) witnessed the closure of

the Egyptian Stock from 28 January to 22 March 2011 (38 consecutive trading sessions) amid the unprecedented events attending the 25 January Revolution. Trading over the counter was also suspended till 28 March, following the sharp decline 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). On the first day of the resumption of trading (23 March), the index lost 23.5 percent as compared with its pre-revolution level, registering the third daily record low since its launch on 2 February, 2003. Such a downtrend reflected enormous sales by investors triggered by worries about further losses. In this setting, the EGX took a number of exceptional actions and measures to bolster investors' confidence (Egyptians and foreigners alike) in the market.

As for the primary market, the number of new issues approved by EFSA during this year reached 2654, at a total value of LE 44.6 billion (against 3426, at a total value of LE 154.3 billion a year earlier). Issues for new incorporations reached 1662 in number (62.6 percent of total issues), at a value of LE 8.5 billion. The number of issues for capital increases reached 992, totaling LE 36.1 billion (81.0 percent of total issues).

The listing activity on the EGX showed that the number of listed companies declined to 211 at end of June 2011, from 215 at end of June 2010. The market capitalization 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 the events of the 25 January Revolution.

CMA & EGX 30 Indices

3001300230033004300530063007300

Jun.

09Ju

l.09

Aug. 0

9

Sept. 0

9

Oct. 09

Nov. 0

9

Dec. 0

9

Jan.

10

Feb.10

Mar.10

Apr.10

May.10

Jun.1

0Ju

l.10

Aug.10

Sept. 1

0

Oct. 10

Nov. 1

0

Dec. 1

0

Jan.

11

Feb.11

Mar.11

Apr.11

May.11

Jun.1

1

Point

CMA EGX 30

The Egyptian Exchange was closed

in the wake of the Revolution of 25th of

January


The value of issued and listed bonds surged by LE 53.2 billion or 31.0 percent in the year under review, posting LE 224.8 billion at end of June 2011, due to the rise of LE 47.0 billion in the value of Egyptian treasury bonds (primary dealers), to register LE 206.8 billion or 92.0 percent of the total value of listed bonds at end of June 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 raise finance 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 of the amortization of the second tranche of the first and second issues of fixed-interest bonds on their maturity dates in April and June 2011.

As for the secondary market, the relevant three indicators (number of

transactions, and number and value of traded securities) pointed to a decline in the reporting year, relative to the previous FY, on the back of the events experienced by Egypt. The number of transactions dropped by 4956 thousand or 40.9 percent, and so did the number of traded securities (shares and bonds) by 9644 million or 29.3 percent, 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 FY

2010/2011 (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 10.9 percent).

Turning to the market of small and medium enterprises (NILEX), the number of listed companies reached 18 at end of June 2011. The market capitalization of listed shares on NILEX amounted to some one billion Egyptian pounds (against LE 0.4 billion at end of June 2010). Traded securities reached 22 million papers through 8224 transactions, with a total value of LE 228 million during FY 2010/2011.

93


Trading in Securities

FY 2007/2008 2008/2009 2009/2010 2010/2011 No. of Transactions (000) 12974 13169 12116 7160 A- Shares, bonds and mutual funds’

certificates (listed)

12374

12123

11383

7068 B- Shares, bonds and mutual funds’

certificates (unlisted)

600

1046

733

84 C- Small and Medium Enterprises

Market (NILEX)*

-

-

-

8 No. of Traded Securities (mn) 23615 31956 32880 23236 A- Shares, bonds and mutual funds’

certificates (listed)

19441

25455

25362

21048 B- Shares, bonds and mutual funds’


4174

6501

7518


Market (NILEX)*

-

-

-

22 Value of Transactions (LE mn) 610591 319682 441315 200578 A- Shares, bonds and mutual funds’

certificates (listed) 544129 278383 312141 182890 B- Shares, bonds and mutual funds’


66462

41299

129174


Market (NILEX)*

-

-

-

228 Source: 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 the previous FY's level, scoring LE 88.7 billion (against LE 129.7 billion). Their transactions resulted in net purchases of LE 2.0 billion (against LE 5.6 billion the previous FY).

Foreign Investors' Transactions during the FY

1

16

31

46

61

76

91

2009/2010 2010/2011

LE bn

PurchasesSalesNet

Annex

Statistical Section

95


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

96 Central 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

(LE mn)

End of June 2005 2006 2007 2008 2009 2010 2011

Reserve 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 71896

Counterpart Assets 101080 116050 134126 169911 175104 203071 250992

Net Foreign Assets 37295 61302 95372 180333 171732 190234 147197

Foreign 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 9134

Net Domestic Assets 63785 54748 38754 -10422 3372 12837 103795

Net 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 87058

Net 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

Liabilities 85567 102068 177153 195108 94553 112215 9028Source : Central Bank of Egypt.* Including subsidiary coins issued by the Ministry of Finance.

(1/1) CBE Financial Position: Reserve Money and Counterpart Assets

** 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, to settle 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 B

ank of Egypt - Annual R

eport 2010/2011 97

End of June 2005 2006 2007 2008 2009 2010 2011

Total 67753 79253 93499 112705 127912 146220 180118

Currency 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 66956

Subsidiary Coins** 226 236 259 275 287 306 324

Source : 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.

(1/2) CBE: Banknote Issued By Denomination 98C

entral Bank of Egypt - A

nnual Report 2010/2011

( LE mn )

During FY 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

Local Currency Transactions via RTGS*

1- Automated Clearing House (ACH)

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 15879701

Foreign 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.

*** This service was introduced on 19/ 9/ 2004.

(1/3) CBE: Transactions via RTGS and SWIFT

Central B


eport 2010/2011 99

End of June 2005 2006 2007 2008 2009 2010 2011

First : Domestic Liquidity 493884 560356 662688 766664 831211 917459 1009411

a - 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 80820

b - 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 176972

Second : 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 -136855


* Rescheduled debts settled under Paris Club agreement.

(2/1) Banking Survey : Domestic Liquidity and Counterpart Assets100

Central B


eport 2010/2011

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

Total Deposits in Local Currency 309676 349223 421854 502191 545899 624134 664552

First : Demand Deposits 26656 35035 44430 65923 64845 78831 80820

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 775 863 819

Second : Time and Saving Deposits 283020 314188 377424 436268 481054 545303 583732





* Including all public sector companies subject or not to Law No. 203 for 1991.

Central B


eport 2010/2011

(2/2) Banking Survey : Deposits in Local Currency

101

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

Total Deposits in Foreign Currencies 121179 136894 153974 159817 167166 158116 176972

First : Demand Deposits 18140 18533 26917 26581 32050 33901 41298




Minus: Purchased cheques & drafts 166 211 172 183 100 140 66

Second : Time and Saving Deposits 103039 118361 127057 133236 135116 124215 135674






(2/3) Banking Survey : Deposits in Foreign Currencies

Central B


eport 2010/2011

102

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

Net Foreign Assets 80913 133385 218629 303680 254134 282408 253500

First : 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 139149

Second : 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 32846


* Due to settling rescheduled debts with the government.

(2/4) Banking Survey : Foreign Assets and LiabilitiesC



103

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

First : 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 99207

Second : 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 9688



** Due to settling rescheduled debts with the government.

104(2/5) Banking Survey : Domestic Credit and Other Items (Net)

Central B


eport 2010/2011

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

Total Saving Vessels 498190 560229 655376 742177 803063 794350 855132

Savings 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 176972

Net Sales of Investment Certificates 58485 63697 68311 79354 81262 90931 94428

Post Office Saving Deposits 35506 45450 55667 66738 73581 not available not available


Central B


eport 2010/2011

(2/6) Total Saving Vessels

105

( LE mn )

( LE mn )

End of June 2006 2007 2008 2009 2010 2011

Gross Domestic Debt (1+2+3-4) 587405 630966 658307 755297 888661 1044914

1- Net Domestic Debt of Government (A+B+C+D+E) 387719 478173 478811 562327 663818 808113

A- 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 7583LE 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 2000

C- Credit Facilities from the Social Insurance Funds 0 4517 2343 2343 2343 2343

D- Net Government Balances with the Banking System -104860 -89241 -92492 -121854 -117757 -113206

E- Government Borrowing from NIB x 142622 0 0 0 0 0

2- 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 2672

4- 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 ).

x As of 1/7/2006, the government debt to the NIB was cleared to zero, and the Bank's 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.

106(3/1) Gross Domestic Debt

Central B


eport 2010/2011

** Apart from the interest payments due to the NIB.

( LE mn )

End of June 2006 2007 2008 2009 2010 2011

Liabilities :of which 354962 169152 193071 205560 227715 240851

Social Insurance Fund for Gov. Employees 135735 27428 29076 29638 31613 32982

Social Insurance Fund for Pub. & Priv. Business Sector Employees 105703 20574 22632 24895 27384 29663

Proceeds from investment certificates 64038 68485 79232 81454 91134 94635

Accumulated interest on investment certificates (category A) 7028 7579 7509 8654 8648 8747

Proceeds from US dollar development bonds 824 483 152 11 10 9

Post office savings 39097 43518 49255 54487 64837 71978

Others* 2537 1085 5215 6421 4089 2837

Assets :of which 354962 169152 193071 205560 227715 240851

Loans to government 142622 0 0 0 0 0

Loans to economic authorities 50196 51734 51279 50062 51469 52141

Investments in government securities (bills and bonds) 6088 6231 8528 9977 13664 15527

Deposits of the NIB with the banking system 3757 2951 3891 4806 5510 2672

Lending for equity participations in holding Companies and affiliated entities,

concessional loans, and others (NIB debt minus its intradebt) 152299 108236 129373 140715 157072 170511Source : Central Bank of Egypt - National Investment Bank.* Including deposits of the private insurance funds, saving certificates, and loans & deposits of various authorities.

(3/2) NIB Resources and UsesC



107

108(US$ mn)

2011 +201020092008200720062005End of June

34905.733694.231531.133892.829898.029592.628948.8Total External Debt*12860.612599.314081.415606.414846.515229.015734.1Rescheduled bilateral debt **7271.67054.67448.07787.87396.57610.67836.4 ODA5589.05544.76633.47818.67450.07618.47897.7 Non-ODA5214.54692.44824.24972.14346.04295.54291.3Other bilateral debt4211.33774.73978.34130.43630.13590.43529.9 Paris Club countries1003.2917.7845.9841.7715.9705.1761.4 Other countries

10808.69977.58168.87361.56815.25205.05058.2International & regional institutions426.0313.5323.6763.5791.6979.5781.6Suppliers' & buyers' credits2821.03079.51926.12651.81570.31861.9613.6Eُgyptian bonds & notes

0.00.00.00.00.0300.0500.0Long-term deposit ***17.577.283.018.278.988.7115.2Private sector debt (non-guaranteed)

2757.52954.82124.02519.31449.51633.01854.8Short-term debt972.71359.51156.11048.3536.0633.1819.3 Deposits1784.81595.3967.91471.0913.5999.91035.5 Other facilities

Source: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

(3/3) External Debt

Central B


eport 2010/2011

(US$ mn)

Change2011 *2010 End of June(-)%Value%Value

1211.7100.034905.9100.033694.2Total(761.3)39.413731.943.014493.2US dollar **

1.10.4145.10.4144.0Canadian dollar10.50.3117.50.3107.0Australian dollar

109.71.8618.71.5509.0Swiss franc(11.6)0.6203.40.6215.0Sterling pound268.412.84480.412.54212.0Japanese yen

9.70.3121.70.3112.0Danish krone1.10.05.10.04.0Norwegian krone2.10.128.10.126.0Swedish krona

138.66.12111.65.91973.0Kuwaiti dinar10.60.143.60.133.0Saudi riyal0.40.130.40.130.0UAE dirham

1229.028.810064.026.28835.0Euro(116.3)1.7605.72.2722.0Egyptain Pound319.77.52598.76.82279.0SDRs

Source: Loans & External Debt Department- CBE* Provisional.** Including other due liabilities in US Dollar.

(3/4) Distribution of External Debt by Main Currency

109

Central B


eport 2010/2011

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 3573


110Central Bank of Egypt - Annual Report 2010/2011

(4/1) Structure of the Egyptian Banking System

Name Registration Date Address

Al-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.

Standard Chartered Bank 12/09/2005 Sheikha Fatma St., City Stars Towers, Star Capital (2), Office No. 21-22, Misr El-Gadedah, Cairo.

Egyptian Sudanese Bank 28/05/2008 4 Ahmed Basha St., 16th 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.


(4/2) Representation Offices of Foreign Banks in Egypt Registered with the CBE (on June 30, 2011)

Central Bank of Egypt - Annual Report 2010/2011

111

End of June 2005 2006 2007 2008 2009 2010 2011

Assets

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 93455

Assets = Liabilities 703628 761562 937923 1083311 1091993 1220655 1269690

Liabilities

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 5143


(5/1) Banks : Aggregate Financial Position

( LE mn )

Central B


eport 2010/2011

112

End of June 2005 2006 2007 2008 2009 2010 2011

Total 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

First : In Local Currency 369067 401143 463320 552079 598587 686052 724878

Demand deposits 31606 41793 50366 71971 69262 84152 86967



Second : In Foreign Currencies 150582 167698 186633 195120 211107 206440 232159

Demand deposits 19951 20638 28393 28598 33591 35366 43120



Source : Central Bank of Egypt. 113

Central B


eport 2010/2011

(5/2) Banks : Deposits by Maturity

( LE mn )

End of June 2005 2006 2007 2008 2009 2010 2011

Total Deposits 519649 568841 649953 747199 809694 892492 957037

In Local Currency 369067 401143 463320 552079 598587 686052 724878

Government sector 57649 49422 37233 44789 49564 58496 56728




External sector ** 1158 1905 3326 4021 2415 2616 2875

In Foreign Currencies 150582 167698 186633 195120 211107 206440 232159





External sector ** 1985 1303 2159 1916 2360 2566 3718



** Including counterpart deposits of USAID.

(5/3) Banks : Deposits by Sector

114

( LE mn )

Central B


eport 2010/2011

End of June 2005 2006 2007 2008 2009 2010 2011

Total 308195 324041 353746 401425 429957 465990 474139

In Local Currency 233141 238926 248544 267166 295192 313654 327764





External sector 492 723 914 897 2587 1254 1091

In Foreign Currencies 75054 85115 105202 134259 134765 152336 146375





External sector 1481 1829 2710 6299 11268 15600 16596



(5/4) Banks : Lending and Discount Balances by Sector

Central B


eport 2010/2011

115

( LE mn )

(LE mn)

Public Private Total Public Private Total Public Private Total

GDP 310236.3 527505.0 837741.3 319640.4 534329.8 853970.2 3.0 1.3 1.9

Agriculture,forestry & fishing 21.1 110256.0 110277.1 21.9 113256.9 113278.8 3.8 2.7 2.7 Extractions 93643.0 21070.0 114713.0 93870.0 21508.0 115378.0 0.2 2.1 0.6

Oil 40104.0 6951.0 47055.0 41081.0 7126.0 48207.0 2.4 2.5 2.4

Natural gas 53139.0 11082.0 64221.0 52385.0 11291.0 63676.0 -1.4 1.9 -0.8

Others 400.0 3037.0 3437.0 404.0 3091.0 3495.0 1.0 1.8 1.7

Manufacturing Industries 21117.0 113647.0 134764.0 20999.0 112485.0 133484.0 -0.6 -1.0 -0.9

Oil refining 3368.0 2731.0 6099.0 3293.0 2777.0 6070.0 -2.2 1.7 -0.5

Others 17749.0 110916.0 128665.0 17706.0 109708.0 127414.0 -0.2 -1.1 -1.0

Electricity 10402.0 1508.0 11910.0 11058.0 1385.2 12443.2 6.3 -8.1 4.5

Water 2927.0 0.0 2927.0 3057.0 0.0 3057.0 4.4 0.0 4.4

Sewerage 702.2 0.0 702.2 732.0 0.0 732.0 4.2 0.0 4.2

Construction & Building 4777.0 39230.0 44007.0 4973.0 40652.0 45625.0 4.1 3.6 3.7

Transportation & Storage 9155.0 27158.0 36313.0 9430.0 27611.0 37041.0 3.0 1.7 2.0

Communications 10130.0 24164.0 34294.0 10742.0 25834.0 36576.0 6.0 6.9 6.7

Information 635.4 1165.4 1800.8 651.0 1201.0 1852.0 2.5 3.1 2.8

Suez Canal 25328.5 0.0 25328.5 28234.0 0.0 28234.0 11.5 0.0 11.5

Wholesale & Retail Trade 3180.0 86266.0 89446.0 3264.0 87582.0 90846.0 2.6 1.5 1.6

Finance 21317.0 11313.0 32630.0 21646.0 11520.0 33166.0 1.5 1.8 1.6

Insurance 2160.0 615.0 2775.0 2220.0 629.0 2849.0 2.8 2.3 2.7Social Solidarity 29016.0 0.0 29016.0 30255.0 0.0 30255.0 4.3 0.0 4.3Tourism 320.0 35328.8 35648.8 332.0 33229.0 33561.0 3.8 -5.9 -5.9

Real Estate 975.0 22511.0 23486.0 1002.0 23251.0 24253.0 2.8 3.3 3.3

Real Estate Ownership 395.0 11739.0 12134.0 409.0 12186.0 12595.0 3.5 3.8 3.8

Business Services 580.0 10772.0 11352.0 593.0 11065.0 11658.0 2.2 2.7 2.7

General Government 73641.0 0.0 73641.0 76337.0 0.0 76337.0 3.7 0.0 3.7

Social Services 789.1 33272.8 34061.9 816.5 34185.7 35002.2 3.5 2.7 2.8

Education 0.0 9578.0 9578.0 0.0 9839.0 9839.0 0.0 2.7 2.7

Health 756.0 10361.0 11117.0 782.0 10628.0 11410.0 3.4 2.6 2.6

Others 33.1 13333.8 13366.9 34.5 13718.7 13753.2 4.2 2.9 2.9

Source : Ministry of Planning.

Central B


eport 2010/2011

116

( 6/1) GDP at Factor Cost by Economic SectorAt 2006/2007 prices

SectorsGrowth Rate %

2009/2010 2010/2011 2010/2011

2009/2010 2010/2011 2009/2010 2010/2011 2009/2010 2010/2011 1-GDP at Market Price(2+5-6) 878.4 894.0 100.0 100.0 5.1 1.8

2- Total Domestic Expenditure (3+4) 898.3 922.5 102.3 103.2 4.9 2.7

3- 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 3.8

4- 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 4.6

6- Imports of Goods & Services 260.5 280.1 29.7 31.3 -3.2 7.5

7-Gross Domestic Saving (1-3) 156.1 139.8 17.8 15.6 9.9 -10.4

.. Not Available.

117

Central B


eport 2010/2011

Source : Ministry of Planning.

(6/2) GDP by Expenditure ( At 2006/ 2007 prices )

Value at LE bn Structure % Growth Rate %

Relative

Weights 2009 2010 2011 2009/2010 2010/2011

All 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.

End of

Central B


eport 2010/2011118

Inflation Rate (%)

June

( 6/3 ) Consumer Price Index (Urban Population) (January 2010=100) *

Group FY

Relative

Weights 2009 2010 20112009/2010 2010/2011

All ITEMS 100.0 148.2 160.9 192.1 8.6 19.4

Agriculture, Forestry and Fishing25.10 188.9 210.9 261.4 11.6 23.9

Mining and Quarrying21.80 134.6 147.8 201.5 9.8 36.3

Manufacturing38.90 140.0 149.6 165.0 6.9 10.3

Electricity, Gas, Steam and Air Conditioning Supply2.30 115.0 140.3 140.3 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 Storage2.80 124.2 124.8 127.3 0.5 2.0

Accommodation and Food Service Activities5.00 114.6 110.6 125.1 -3.5 13.1

Information and Communications2.10 112.5 112.5 112.5 0.0 0.0

Source: Central Agency for Public Mobilization and Statistics (CAPMAS) the PPI Bi-monthly Bulletin.

( 6/4 ) Producer Price Index (PPI) (2004/2005 = 100)

End of June Inflation Rate (%)

GroupFY

Central B


eport 2010/2011

119

( LE mn )

During FY

Total Revenues 268114 303361 259617 296341

Tax Revenues 170494 170494 191626 191626

Grants 4332 4332 1723 1723

Property Income 54570 61618 41803 49436

Sales of Goods and Services 17212 17212 15160 15160

Financing Investments 8873 8873 6755 6755

Others 12633 40832 2550 31641

Total Expenditures 365987 396768 392097 430641

Compensation of Employees 85369 86377 95082 96369

Purchase of Goods and Services 28059 28244 23785 24283

Interests72333 62277 81081 72366

Subsidies ,Grants and Social Beneifts102975 142360 122834 167974

Other Expenditures 28901 29047 31363 31552

Purchase of Non-Financial Assets (Investments) 48350 48463 37952 38097

Cash Deficit 97873 93407 132480 134300

Net Acquisition of Financial Assets 165 5479 -2120 -4262

Overall Deficit 98038 98886 130360 130038

Source : The Ministry of Finance.

(7/1) Summary of Consolidated Fiscal Operations of General Government( The Budget sector , NIB & SIFs )

2009/2010

The Budget Sector The Budget Sector,NIB & SIFs

Actual


The Budget Sector

2010/2011

The Budget Sector,NIB & SIFs

120

( LE mn )

Actual

During FY

Financing Sources 98038 98886 130360 130038

Domestic Financing 101492 102415 144149 135560

Banking Financing 40263 39380 99970 97625

CBE11561 11561 24540 24540

Other Banks28702 27819 75430 73085

Non- Banking Financing 61229 63035 44179 37935

CBE3687 0 1227 0

SIFs5176 0 11071 0

Other53014 53014 30954 30954

Borrowing from NIB0 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 Entities0 0 0 0

Financing Effects for Eliminations0 -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 -15123

Cash deficit (surplus) as a percentage of GDP8.1% 7.7% 9.6% 9.7%

Overall fiscal balance as a percentage of GDP8.1% 8.2% 9.5% 9.4%

Revenues as a percentage of GDP22.2% 25.1% 18.8% 21.5%

Expenditures as a percentage of GDP30.3% 32.9% 28.5% 31.3%

Sourse: Ministry of Finance.


(7/2) Summary of Consolidated Fiscal Operations of General Government

( The Budget sector , NIB & SIFs )

2009/2010 2010/2011

The Budget Sector,NIB & SIFsThe Budget Sector The Budget

Sector,NIB & SIFs The Budget Sector

(US$ mn)

Change

Value ٪ Value ٪ (-)

Balance of Current Account (4317.6) (2768.8) 1548.8

Balance 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.

122


(8/1) Balance of Payments

2009/2010*

FY

2010/2011*

(US$ mn)

2009/2010* 2010/2011*Value Value

Capital & Financial Account 8325.4 -4823.5

Capital Account -36.2 -32.3

Financial Account 8361.6 -4791.2

Direct Investment Abroad -976.6 -958.0 Direct Investment in Egypt (Net) 6758.2 2188.6 Portfolio Investments Abroad -522.2 -117.7 Portfolio Investments in Egypt (Net), Of which : 7879.3 -2550.9 Bonds 1357.3 211.0 Other 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.

( 8/1) Balance of Payments (Contd.)


FY

End of

Minimum

Maximum

Weighted average

Second: Market Rates Buy Sell Buy Sell

US Dollar 568.07 570.96 595.58 598.49

Euro 697.53 701.48 861.15 865.41

Pound Sterling 853.02 857.64 953.70 958.54

Swiss Franc 525.31 528.28 713.18 716.84

100 Japanese Yen 640.44 643.77 740.58 744.57

Saudi Riyal 151.46 152.24 158.81 159.60

Kuwaiti Dinar 1948.12 1966.12 2161.81 2176.32

UAE Dirham 154.63 155.48 162.12 162.96

Chinese Yuan 83.76 84.19 92.14 92.59

Source : CBE

The interbank Rates started at 23/12/2004

June 2011

596.70

597.10569.70

569.52

First: US dollar Interbank Rate

124


596.90

June 2010

(8/2) Average Exchange Rates

(In piasters per foreign currency unit)

569.40

Number of Transactions

(Unit)

Amount (Thousand)

Market Value (mn)

Number of Transactions

(Unit)

Amount (Thousand)

Market Value (mn)

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 13717

Foreign Currencies (US Dollar) 326727 1077180 3593 147376 599556 1423



Foreign Currencies (Euro) 26 3388 88 9 265 36



Source : Egyptian Financial Supervisory Authority (EFSA), Capital Market Monthly Report.

125

2009/2010

(9/1) Trading in Shares on the Egyptian Exchange

Central B


eport 2010/2011

During FY

2010/2011

Number of Transactions Amount Market Value Number of

Transactions Amount Market Value

(Thousand) (Thousand)

In Egyptian Pound 1218 46492990 47889797 1558 45139785 45114731



In US Dollar 0 0 0 0 0 0




126

2009/2010

During FY

2010/2011

(Unit)

Central B


eport 2010/2011

(9/2) Trading in Bonds on the Egyptian Exchange

(Unit)

Egyptian Pound US Dollar Egyptian Pound US Dollar

Net Number of Transactions (Unit) 131934 6747 57000 3731

Purchases 1055605 47196 870112 32561

Sales 923671 40449 813112 28830

Net Volume of Securities (mn) 346 30 42 7

Purchases 4241 243 3726 123

Sales 3895 213 3684 116

Net Value of Securities (mn) 5004 106 2070 -15

Purchases 64421 580 44104 217

Sales 59417 474 42034 232


127

2009/2010

(9/3) Foreigners' Transactions on the Egyptian Exchange

Central B


eport 2010/2011During FY

2010/2011

Periodical Publications of the Central Bank of Egypt

Periodicity Language Name of Publication

Monthly Arabic and English 1 -Monthly Statistical Bulletin

Quarterly Arabic and English 2 -Economic Review

Every fiscal year Arabic and English 3 -Annual Report

Quarterly English 4 -External Position of the Egyptian Economy

Notes:

- All publications of the Central Bank of Egypt are available on the CBE's 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.

annual report2011 cbe

Economy & Finance