Official source told Amwal Al Ghad that Central Bank of Egypt (CBE) conducted intensive negotiations – on behalf of Ministry of Finance – with a number of Egyptian banks that have strong presence in Arab Gulf countries to contribute in issuing first dollar certificates of deposit for Egyptians living in Arab countries.
Sources added that these talks resulted in selecting a list of banks including; National Bank of Egypt (NBE) as the issuance manager as well as, Banque Misr, Arab Banking Corporation (ABC), National Bank of Abu Dhabi (NBAD), Arab Bank and National Bank of Kuwait (NBK). Issuance of those certificates is considered a crucial step taken by monetary policy makers in Egypt to lessen the sharp fall of Egypt’s foreign reserves due to lack of dollar resources that followed the Egyptian economy’s turmoil since last year’s uprising that ousted Hosni Mubarak.
Abu Dhabi’s government contributed in the studies done over issuance of the dollar certificates of deposit in Arab countries. These studies done at the end of 2011 included the required standards of the certificates and suggestions on return rates and terms.
Central Bank of Egypt and Ministry of Finance agreed on the conditions on issuance and circulation of certificates with a value of US$ 1000 / certificate, without a maximum sale limit. In addition, the 3-year certificate, which gives 4% annual return, can be redeemed anytime upon customer.
Sources expected that the yield on these certificates will range from 2 to 3 US$ billion after being launched in many Arab countries such as Kuwait, United Arab Emirates, Qatar, Saudi Arabia and Tunisia, among other where Egyptian currency is highly circulated. The certificate is likely to be offered in European and American countries for Egyptians living there, if the first issuance witnessed high demand.
Sources expected that certificates were destined to be launched last March, but monetary authorities in some Arab countries, such as Saudi Arabia, did not approve issuing the certificates till now. In addition, Egypt’s embassies in some of these countries do not have a full cooperation with the five issuers (banks).
Some Arab countries disapproved the 4% interest rate, assuming that the higher demand will go for Egyptian certificates leading depositors to withdraw their money from local banks in those countries.
The marketing campaign of these certificates is assigned to Tarek Nour Agency which already began to shot a number of TV advertisements stressing on Egyptians’ national duty to support the country’s economy. These advertisements will be broadcasted on channels in Arab countries where Egyptians are living.
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Sources added that this move has been faced with a state of rejection by some Islamic political parties who demanded to issue Islamic Sharia-compliant sukuk instead. However, government neglected their demands as there is no law in Egypt regulating this type of instruments.Launching these certificates shows that Egypt is mainly targeting fill the gap in its foreign liquidity financing shortage on sharp decrease of dollar resources especially after International Monetary Fund and other Arab and international financial institutions rejected loaning Egypt due to the current instability witnessed by all economic sectors and the absence of a clear reform plan. Accordingly, Egypt’s foreign reserves are sharply retreating as they dropped to US$ 15.1 billion on Monday with a retreat of US$ 21.5 billion since last year’s revolt. |
