Bankers affirmed that the Egyptian banking sector has the ability to meet the financial requirements of the 11 projects which were announced by the Ministry of Finance to be established through the Public-Private Partnership system (PPP).
Bankers said foreign investments in government debt instruments will come after regaining the investors’ confidence in the Egyptian market. This will accordingly make banks dissociate gradually from investing in the government securities as the country turned to the local market to plug the budget deficit and banks also turned to invest in government debt instruments after lending rates dropped.
Ahmed Al Masry, head of business and companies sector at the National Bank for Development (NBD), said the PPP projects are mostly infrastructure projects such as building roads, drainage pumping stations, drinking water stations, schools and hospitals. Most of these projects depend on local-currency finances.
The Central Bank of Egypt’s (CBE) decision to lower the reserve requirement ratio to 10% from 14% increased the banks’ liquidity. However, banks turned to invest in government debt instruments as lending rates were retreating, Al Masry added.
Financing these projects needs multi-segment loans, which means banks will dissociate gradually from investing in government debt instruments to provide the required finances for such projects, he noted.
The establishment of the new projects needs the approval of the Cabinet. The executive regulations of the law that was earlier approved by the former parliament need the approval of the next parliament, he stated.
Mohamed Taha, board member at Banque Du Caire, said the banking sector in Egypt has sufficient liquidity to finance all projects that have acceptable feasibility studies and contribute to the national economy such as the PPP projects. The volume of the deposits held with banks in Egypt exceeds EGP one trillion, according to the latest statics issued by the Central Bank of Egypt.
Taha said injecting huge investments in government debt instruments was a temporary action taken by banks amid the low lending rates. Investors will be confident again in the Egyptian market after the political and economic situations become more stable. Afterwards, banks will dissociate gradually from investing in government debt instruments to provide the required finances for many projects.
