Egypt has become the focus of world attention and is a promising market for any investor, according to Mohamed El-Etreby, Chairman of Banque Misr. He added that the rates of revenues for investing in Egypt are some of the highest rates in the world.
In an exclusive interview with Daily News Egypt, El-Etreby said the government took bold reforming procedures in the last period that impacted improving the state’s credit rating. Moreover, the government sought to merge the unofficial economy into the official one, which will positively impact the country and its revenues.
El-Etreby recommended that all Egyptian citizens should work hard, stay away from demonstrations and factional demands, and focus on production. He also stressed the importance of ending all disputes between foreign investors and the state, while maintaining the rights of both parties.
El-Etreby asserted that the banking sector is very strong, and ready with the adequate liquidity to fund all projects.
How do you perceive the present and the future of the Egyptian economy?
Despite the crises the world is going through, especially after China reduced the value of its currency, and the impact of that on most countries worldwide, as well as the expectations this will affect the economies of Egypt and other developing countries, I am optimistic about the future of Egypt’s economy.
The reason for that optimism is the bold steps taken by President Abdel Fattah Al-Sisi and the government, whether related to the subsidies system, issuing the Unified Investment Law and its implementing regulations, or in solving the problems of local and foreign investors, and paying the dues of the foreigners.
Moreover, what happened at March’s Economic Summit had positive impacts, as it received a lot of worldwide praise. This is in addition to the New Suez Canal Project that amazed the world, whether through its funding operation, where the EGP 64bn needed was collected in only eight days, or by implementing and completing the project in record time that did not exceed a year. This sent a message to the world about the strength and hardiness of the Egyptian people, and its belief in supporting national projects.
All these positive indicators support my optimism about the future, especially with the improvement of Egypt’s credit rating by the international rating agencies. I hope the gross domestic product (GDP) will grow with the expected rates and exceed 5%. I also expect the foreign exchange reserves to improve, with the return of foreign investment, and tourism recovery.
What are the other procedures you believe support the economy?
The government started to take serious steps in merging the unofficial economy into the official one. If we know that the unofficial economy is estimated at about EGP 1tr; we can imagine the impact on the state’s revenues of merging it into the official economy. Moreover, small and medium projects receive significant attention from the government, the Central Bank of Egypt (CBE), and banks. This is in addition to the CBE’s efforts, and the meeting it held with banks and the Mortgage Finance Fund (MFF) to support the real estate financing initiative launched by the CBE in February 2014.
It is also known that activating the real estate sector is very important to the Egyptian economy, especially as a further 60 industries and businesses are related to that sector. The numbers achieved by the banks in the CBE initiative are expected to double in the next period, which will have positive impacts on the economy as well.
Regarding the CBE’s efforts to support the economy in different fields, how do you evaluate the impact of its latest procedures related to the exchange market on banks?
The procedures the CBE took over the last months, on top of which is restricting foreign currency deposits, have multiplied the banks’ dollar resources several times, compared to the situation before these procedures. That is in addition to eliminating the currency black market. At Banque Misr, the dollar resources increased approximately five-fold, compared to their size before the decision, which contributed to the absence of waiting lists of customers demanding dollars from the bank. With the economic improvement and the increase in the country’s foreign exchange resources, I expect the CBE to reactivate the dollar interbank mechanism, which will contribute to making the dollar available in all banks.
How do you evaluate Egypt’s ability to attract foreign investments?
In spite of some of the problems and challenges Egypt is facing, the Egyptian market is very attractive to foreign investments, where the investment revenue rates in Egypt are some of the highest rates any investor in the world can obtain. Egypt became the focus of world attention, and has the population density that makes it a promising market for any investor.
In your opinion, what does the Egyptian economy need to restore its position?
I believe that the state itself is going in the right path. However, everybody has to be keen to work, and to keep away from demonstrations and fractional demands, and to focus more on production.
Moreover, we need more political and security stability. We are already on our way to achieving that, and seeing the recovery of tourism to what it was before January 2011, at least. The tourism revenues had reached approximately $13bn annually before the 25 January Revolution. God granted our country all the tourism elements; we do not lack anything. As such, the tourism revenues should be more than that. Moreover, we need to quickly resolve all the disputes between foreign investors and the state, while maintaining the rights of both parties.
What about the banking sector’s role in supporting the economy and funding the huge projects that we anticipate in the upcoming period?
The banking sector is strong and solid, and its numbers speak for themselves. This sector has overcome many crises, the most prominent of these being the 2008 global financial crisis, which the Egyptian banks survived safely. They also survived the 25 January Revolution and the economic recession that followed it. Moreover, the banking sector was one of the most important sectors supporting the country in a lot of crises, helping it overcome all the difficulties it faced in the last few years, under the umbrella of the CBE. Now, the sector also asserts it is ready with the adequate liquidity to fund all proposed projects, providing that they have a positive impact on the national economy, and that their cash flows are enough to repay the loans’ value and interest.
It is known that the loans-to-deposit ratio in the banks working in the Egyptian market range between 41%-45%. This means that the banks will not have any problem in providing liquidity to fund the projects in Egyptian pounds. However, as for the projects that need foreign currency, the investors need to provide part of that funding from abroad, in order not to push the banks working in the Egyptian markets to provide the foreign exchange.
How can banks carry out their role in funding projects while they are burdened with financing the state budget deficit?
First of all, the banks are not obliged to finance the state budget deficit. Perhaps the public banks in particular have a role in supporting the state in that issue, given that these banks are owned by the government. However, that does not affect their role in funding the projects. At Banque Misr, for instance, the loans-to-deposit ratio amounts to about 22%, which means that there is a lot of liquidity in the bank. This means it qualifies to fund the different kinds of projects, as well as financing the state budget deficit through the treasury bonds the government issues. The banks’ main concern is project funding. It is known that funding these projects makes gains for the banks, more than the revenue of treasury bills and bonds. However, if the projects the banks invest their money in are not available, the banks have no option except investing in the debt instruments, in light of their keenness to use their liquidity in the best way.
What is the role of Banque Misr in serving the Egyptian economy?
Banque Misr is known to have a prominent role in supporting the Egyptian economy since its emergence, not only now. We, at the bank, focus on expanding in financing the projects that have an impact on the country and which are economically viable. In addition to the huge projects the bank funds, we also target expanding in the funding of the small and medium projects, as well as supporting the CBE initiative of activating the real estate finance. Moreover, the bank is ready to fund any projects related to developing the Suez Canal Axis, due to the importance these projects have in supporting the national economy. The bank has funded some of the projects proposed during the Economic Summit that took place last March.
