Banking sector upgrade to help economy

Egypt's Banks, both state-owned and private, must upgrade their operations to contribute more positively to the economy and also to be able to finance development projects, a senior World Bank official said.

The Director of the Privatisation Department at the World Bank (WB), Khaled Fouad Sherif, made the above statement during his address to a symposium held in Cairo yesterday under the banner of "Public banks and their impact on the national economy".

The decline in investment from international financial institutions is holding up the performance of Egyptian banks, he said.

He recommended speeding up the sale of state-owned banks to the private sector before the current situation worsens and privatisation becomes more difficult.

However, he warned against selling public banks just for a change of name, as ownership must also be transferred to specialised banking entities that can upgrade management and enhance banking services.

Sherif said that the golden age of privatisation during the mid 90's was over as international capital markets were facing many problems, which had led to a marked decline in foreign investment in Egypt.

Studies of the banking sector in East Europe, Central Asia, Latin America and the Middle East prove that state ownership of banks increases bad debts and decreases profits.

He added that the studies proved that private banks performed better than public ones in the Middle East, which had caused losses to depositors.