- The Egyptian President, government ministers and Central Bank on Sunday went a long way in assuring the national banking sector and economy were in healthy conditions. Only exports and foreign investments could be influenced by the current crisis, and GDP growth should remain strong.
President Hosni Mubarak on Sunday discussed the necessary measures for confronting the world financial crisis and its potential impacts on the economic and financial conditions in Egypt with members of his government and the Central Bank of Egypt. "The Egyptian banking system is capable of fully absorbing the international financial crisis without leaving behind any negative impact," Prime Minister Ahmed Nazif concluded at a joint press conference with Central Bank of Egypt Governor Farouq al-Oqda and Investment Minister Mahmoud Mohieldin.
"As the financial crisis started to bite, the government with all its sectors was following up developments in the international stock markets and their impact on international economic growth rate as well as on the Egyptian economy to avoid any repercussions," he said.
However, government agreed the crisis could have an impact on three levels; the Egyptian financial and banking sectors, the Egyptian bourse and the Egyptian economic growth rate. Several sectors, including the export industry and the tourism industry, could meet tougher times, according to PM Nazif.
The Prime Minister said Egypt launched a plan for reforming the banking system in 2004. The first stage would be finalised by the end of 2008. Under the plan, several small banks have joined bigger entities, banks' capital increased, he said, noting that the auditing system of the Central Bank was reinforced and the bank's law was amended. "The Central Bank took crucial measures, including diversifying the currency basket and setting ceiling for foreign deposits, to dwarf the impact of the ebb and flow of international markets," the PM said.
Meanwhile, Mr Nazif said "although the real estate sector is still nascent, it has a great impact and we would rely on it in the coming period to help maintain the economic growth rate." The Egyptian property market, with a growing influx of holiday housing, has already noted a downwards trend. "The international financial crisis affected the world market and the Egyptian stock market was no exception," the PM added.
Prime Minister Ahmed Nazif voiced hope that Egypt would maintain its economic growth rate between 6.8 and 7.2 percent in line with the past few years. The latest IMF evaluation of world economic growth, issued last week, maintains that the North African region will almost not be affected by the global finance crisis when it comes to GDP growth.
According to Egyptian government sources, President Mubarak had ordered ministers to draw up a mechanism for maintaining the growth rate while proceeding with the basic economic reform programme, Nazif said.
On his part, Farouq Al-Oqda, the Governor of the Central Bank of Egypt (CBE) said the CBE has reserves worth US$ 35 billion, which are deposited in safe government bonds. He said "the CBE has not lost a penny."
He reiterated that the current developments in foreign banks would not be echoed in the Arab ones, noting that the plan for reforming the banking system which was ratified by President Mubarak in 2004 "succeeded by 95 percent." He said the foreign exchange rate is disciplined, adding the black market has been closed for ever.
Meanwhile, Investment Minister Mahmoud Mohi Eddin said the Egyptian banking system was "safe and solid," noting that banks had enough liquidity. Mr Eddin denied that Egypt had direct investments in any of the heavy-weight financial institutions that collapsed recently. He added, however, that Egypt was not isolated from international developments.
The international crisis could affect exportation and importation, Suez Canal revenues as well as investments in the Egyptian bourse which contribute part of the hard currency reserves as well as foreign investments which are the main source of foreign currency, he said.
Mr Eddin further expected the tourism sector to be influenced by the crisis, calling for tapping new markets for tourism in Arab and Asian states.
"Egypt's banking system will not be much affected by the world financial crisis as most of credits are limited to local market and so the national economy is away from the current world real estate financing crisis," the Finance Minister Yousef Butros Ghali added, speaking from an IMF meeting in Washington. "Besides, our economy is strong and is capable of surmounting the current crisis," he said.
In case demand on Egyptian exports goes down, local consumption and investments will give an impetus to the national economy to keep budget deficit rate, estimated at 6.6 percent of GDP, stable, and keeping Egyptian pound stable to the dollar, an optimistic Finance Minister said. Local and foreign debts are also within safe limits, he added.
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