Ramadan Anwar, CEO of Union National Bank, said security and political stability are a must for Egypt’s economic recovery as stability will attract foreign investments and boost dollar resources that sharply declined amid the transitional period affecting negatively Egypt’s foreign reserves that retreated by US$ 22 billion since last year’s revolution. This contributed in the lowering of the country’s credit rating which affected negatively Egypt’s position regarding foreign borrowing.
Egypt’s Economic Situation Amid Political Turmoil
Anwar said: Since February 2011, volume of production declined, investors retreated from injecting investments in the Egyptian market and economic sectors witnessed recession because of the security lax, political instability, and unclear view. Accordingly, the country’s growth rate has fell and foreign reserves have been sharply declined. Therefore, concerted efforts shall be made to overcome a potential crisis.
An integrated economic plan shall be laid down to implement more rationing and increase production. Anwar recommends rationing the volume of imports by decrease complementary goods imports to relive the burden on foreign currency reserves together and boosting production rates.
Security is a key factor affecting on tourism that represents one of the pillars of the national economy, he added. Security lax that followed the revolution has affected both tourism and foreign investments, and accordingly foreign reserves declined as the foreign currency revenues came only from Suez Canal and overseas funds sent by Egyptian workers abroad.
Strikes and protests held by workers and employees, which have been increased since the revolution, demanding increasing their salaries or having extra benefits, have increased the burden on the state budget. Therefore, strikes and protests shall be reduced to increase production.
The period prior to the presidential elections is expected to witness an atmosphere of uncertainty, and accordingly there will no new investments because presidential candidates’ economic platforms are unclear.
Economic Reform Priorities
First of all, security situation is an important factor as investors are watching the security situation in Egypt. In addition, workers protests impede production. These factors are making economic reform plans in vain. Political stability will guarantee economic improvement. Anwar recommended boosting sectors that are most sensitive to changes such as tourism. As political stability returns, tourism can achieve good returns in two months. On the other hand, industry and agriculture sectors require long-term reform plans. Improving industry and agriculture is important as the country’s balance of trade reported a wide deficit. Therefore, agriculture production shall be improved to reach agricultural self-sufficiency and industrial production and exports shall be boosted as industrial products and textile industry in particular are collapsing because of competing with high-quality, low-cost foreign products.
Egypt’s dollar certificates of deposit contribute in attracting the savings of Egyptian workers abroad which will decrease the country’s high-cost local debt.
Egypt is depending on the local debt to finance the budget deficit. However, the country shall diversify borrowing sources together with laying down a clear plan for loans’ items of expenditure and boosting revenues to guarantee repayment of loans.
Positive Indicators
Central Bank reports since the outbreak of the revolution showing an increase in deposits of the Egyptian banking sector despite the crisis, which confirms that the trend for savings is apparently to grow well, and to contribute to the financing of projects development during the coming period awaiting a more stable state of security and stability the country.
Egyptian banking system is the least affected by January Uprising implications as a result of reform policies adopted by the central bank since 2004 until now, in addition to providing sufficient guarantees to depositors, in order to broadcast a level of a confidence among clients and assure the safeness of their investments in Egypt.
The central bank has achieved significant success and reform when he worked independently, since the end of the nineties of the last century, the thing that was reflected positively on the working banks in the market. “CBE does not accept any interventions in its monetary policies,” he assured.
Bank’s Performance in Egypt
Upon Acquisition, the bank’s capital base recorded negative values and therefore the bank’s management had to increase the capital, as a first stage, to EGP 500 million to comply with the regulations of the Central Bank about banks’ capital.
Capital had been raised to EGP 673 million, while the capital base reached to EGP 730 million, Shareholders then decided to support the financial position of the banks using all the realized profits. I believe that there will be no obstacle to any further capital raises when needed.
All nonperforming debts were a result of the acquisition of Alexandria Commercial and Maritime Bank in addition to a gap in provision, but we were able during the last period to settle a large amount of customers’ debts, and maintaining their safe levels, in addition to bridging provisions’ gap by 106%, which means that for every bad EGP 1, there is 1.06 EGP allocated.
The bank’s management studied nonperforming debts carefully to determined defaulting clients as a result of market conditions, those clients are provided with the bank’s full support and needed credit facilities, While legally pursuing customers who did not pay their loans in existing and performing projects.
By 2011 end, Total loans posted about EGP 2.4 billion compared to EGP 2.1 billion in the same period of 2010, with an an increase of EGP 303 million, to record a growth rate of 14.4 %. Total customer deposits amounted EGP 3.3 billion compared to EGP 3.2 billion, despite the hard conditions experienced by the Egyptian economy.
