CBE governor: surplus in balance of payments; banks to have quality loans and profit
Egypt, Economics, 6/25/2003

Mahmoud Abul Oyoun, Governor the Central Bank of Egypt (CBE) said that the economic performance figures reflect a wave of activity, adding that it is time for Egyptian banks to achieve more profitability and growth after the exchange rate wee deregulated.

He said banks have demonstrated their capability to successfully manage the foreign exchange market without any pressures or intervention by any party.

Foreign exchange receipts entering banks and exchange offices during the past four months exceeded $ 2 billion, he said, adding that prices have started to stabilize on the market as a result of the backtracking of speculations outside banks and exchange offices.

Abul Oyoun said that the CBE intervenes, in the market only when necessary, adding that the CBE has never intervened since the beginning of deregulating the exchange rate, in the prices declared by banks.

This came at the meeting held by the CBE governor with the eighth batch of the banking leadership-training program held by the banking institute.

The CBE governor said that the financial sector is the lifeline for any developing economy, adding that Egypt possesses highly efficient human cadres, which are capable of shouldering responsibility.

He said developing the future of the banking system means giving wider attention to self-potentials and securing the quality of assets in banks and not focussing only on profitability.

Under the new banks law, he said, the CBE's role focuses on the monitoring aspect, regardless of who possesses the bank, indicating that the strength of banks is the biggest guarantee for maintaining the strength of the banking system as a whole.

He stressed the need for banks to enhance their capability against risks and how to manage them, saying that banks should focus on how to manage assets instead of focussing on profitability.

The credit sector is no longer the only sector which is capable of generating profitability, he said, adding that credit expansion in the middle of the 1970s caused much problems.

He called on banking readerships to cooperate and to exchange information as a means for developing the banking sector as a whole.

He called for paying wider attention to research and to support publishing specialized scientific magazines by banks. He said the latest economic reports on Egypt showed strength of Egypt's economic situation.

Abul Oyoun said that the reports showed also that foreign debts are paid ahead of schedule, adding that the CBE issues a quarterly report which is needed for attracting investors whether for direct investment or investing in financial portfolios.

He stressed the importance of having a Gross Domestic Product that is higher than the population rate so as to maximize the per capita share, indicating that Egypt's GDP has slightly increased during the past two years because of foreign shocks.

The economic transformation process launched in the early 1990s, together with expansion of the banking system, encouraging investment and pumping credits have weakened the bank's role, he said, adding that the banks will restore their dues.

He said the raining period of this year will witness decline of interest rate in order to find a way out of the current slackness and to encourage investment, indicating that the government aims at increasing growth rate and providing new job opportunities.

He said the banks should help the government in investing the public funds in well-studied investment opportunities. The CBE has launched a clearing room with the aim of collecting cheques.

Abul Oyoun noted that the current stage reflects a better economic performance, adding that there are indications that the volume of local liquidity has increased to reach L.E. 366.5 billion at the end of last March, compared to L.E. 168.5 billion in 1996.

He said the volume of foreign assets rose from L.E. 17.3 billion to L.E. 19.6 billion at the end of last March.

Stability of exchange rate is not an end in itself, he said, noting that the main goal is more exports and production as this is the only way to breathe more life in the Egyptian pound.

Concluding, he said reports showed that the Egyptian economy was achieving a surplus during the first six months of this year.

He said the CBE is responsible for providing foreign exchange, adding that banks have enough resources to satisfy any importation requests.

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