Financial structural program to heal Egyptian institutions
Egypt, Economics, 6/12/2002

Welcoming the Financial Structural Adjustment Program (FSAP), currently applied by Egypt in cooperation with the International Monetary Fund (IMF), experts noted that the program helps in making sound reform measures to heal the flaws in the financial institutions, especially that the recent economic slackness has negatively affected such sector's performance.

"However, the success of this program needs a package of economic and financial policies to back the financial sector, experts believe. Accordingly, the financial institutions, especially banks, should set up specialized departments for financial crisis management, early warnings and banks' internal rating," they added.

Following the series of monetary and financial crises faced in the 90s, a number of advanced and developing countries, including Japan, Argentina, Chile, Brazil and some Scandinavian countries, the IMF and World Bank officials intensively sought several possible solutions.

As a result, the two world institutions launched in 1999 an FSAP based on two key indices; one for the financial sector involving bank capital adequacy rate, liquidity and revenues.

The second index is an economic and monetary one for banks, insurance companies and stock exchanges, including capital and monetary accounts in the balance of payment as well as inflation and budget deficit.

The program firstly started by 12 countries and then extended to include 53 countries, including Egypt.

The FSAP mainly aims at assisting the involved countries to find out a general framework for a consistent policy to strengthen the financial sector.

It also bolsters the financial sector to be better able to stand up to external and internal meltdown and minimize their consequent negative impact.

Moreover, it helps the financial sector develop its efficiency and capability in contributing to economic development.

To experts, the implementation of the FSAP by Egypt is extremely useful, since it helps determine the strong and weak points of the financial sector. It also directly links between the macro-economic indices and those of the financial sector, as well as the influence of such indices on the financial institutions, experts elaborated.

"In addition, the program assists in qualifying the financial institutions' staff, a matter that may enhance their capability of predicting crises," they added.

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