The share of Banque du Caire in joint loans arranged for a number of major projects during the first half (H1) of 2016 amounts to EGP 8bn, according to Mounir El Zahid, chairperson of the bank.
El Zahid told Daily News Egypt that the bank is keen to finance different economic sectors to support the state’s economic and social development.
He added that banks working in the Egyptian market, especially public banks, have a great amount of experience in financing development projects in all sectors.
What is your evaluation of Egypt’s economy currently?
The economy is witnessing improvements. This is clear through the presence of a short- and long-term economic map, and the government’s keenness to improve the investment climate and increase Egypt’s competitiveness, as well as restructuring the public budget. This will provide support to the economy over the upcoming period.
In your opinion, what are the main challenges facing the economy currently? How can we overcome these challenges?
Reducing the deficit is one of the main challenges facing the economy with the state’s commitment to paying all the financial burdens of social protection programmes. These programmes ensure the delivery of support to those who need it.
What are the economy’s strengths?
There are many points of strength. At the top is the complexity of national income resources. Some of the most important resources are the Suez Canal revenues, petroleum and gas revenues, in addition to revenues from pharmaceuticals, construction materials, textile and garments, food industries, agricultural, and tourist activities. These enhance the economy’s ability to face challenges.
The application of the policies of the state and the Central Bank of Egypt (CBE) to integrate the official sector with the unofficial sector into one system is one of the main strengths of the economy. Especially with the launch of the small- and medium-sized enterprises (SME) initiative, which has contributed to granting larger opportunities to the industries supporting different businesses working under the umbrella of the unofficial sector. This has eventually enhanced economic growth.
In your opinion, what is needed to push the economy to strong growth?
The Egyptian government is taking a number of measures and policies to push the national economy to grow and provide an appropriate return on investment, such as the legislative amendments, a new tax system, and the unified investment law that helps to involve major investors in all investments.
Moreover, the initiative the Central Bank of Egypt (CBE) launched to support SMEs, as an implementation of the president’s decision, contributes to pushing economic growth, achieving sustainable development in all the vital sectors in the country, achieving financial inclusion, expanding the customer base of banks, and integrating a large percentage of the informal economy into the formal system, in light of a lending rate amounting to 5%.
The importance of these enterprises comes from the fact that they are the main pillar through which more job opportunities for young people are created, the market is moved, and the gross domestic product is increased. In the developing countries’ economies, the SMEs sector makes 66% of the national income with both its formal and informal sides.
The establishment of an independent body affiliated to the Ministry of Trade and Industry for SMEs leads to achieving many positive results, which contribute to stimulating the CBE’s initiative and the advancement of the national economy.
The next period requires the continued application of the economic reform programme, increasing the volume of investments, and achieving stability in the foreign exchange market.
What are the activities or projects that can help accelerate the economy?
The sectors of electricity, renewable energy, petroleum, and real estate development come at the forefront of sectors that contribute to economic growth, owing to their great importance in supporting development plans.
SMEs also occupy a key position in developing the national economy across all the country’s vital sectors, which goes in line with the state’s policy and the CBE’s directions.
The agricultural sector as well is one of the most important sectors that contribute to moving the national economy through many of its activities. On top of these activities comes the national project of reclaiming and developing 1.5m acres, which aims to increase the agricultural area and provide needed amounts of wheat.
How can the state overcome the crisis of foreign exchange shortages?
Several solutions can be applied to overcome the US dollar crisis, the most prominent of which is to continue taking the necessary measures to decrease the requests to import non-essential goods so as to relieve pressure on the US dollar and direct it to meet the needs of those importing basic and strategic commodities.
It is also very important to tighten control on the customs ports, to stop importing for the purpose of trading, and for the CBE to continue implementing the measures and controls necessary for tackling the unofficial market by toughening penalties on violating exchange firms that harm the economy.
It is also necessary to work on stimulating tourism and foreign investments, which are the most prominent foreign exchange resources in addition to stimulating the remittances of Egyptians working abroad by offering optional programmes to help increase these remittances in return for the state offering their owners customs incentives or enabling them to own real estate or agricultural lands, in addition to other alternatives that benefit the national economy.
What is the role of banks in easing the severity of this crisis?
The CBE is taking many important measures to besiege the speculation on the currency. Moreover, it launched several initiatives in which banks are involved in, such as the SMEs initiative that contributes to the creation of more job opportunities and stimulating local production to replace imports. Additionally, the CBE launched the real estate financing initiative that has contributed to moving the demand in the market, especially given that a large number of economic sectors are linked to the construction and housing sector.
What is the role banks can play to support the economy and help it to move forwards strongly?
The banking sector is the backbone of the economy. It is also the most prominent sector in terms of power and performance efficiency among the economic sectors. That has helped in preventing Egypt’s financial and economic system from collapsing in recent years.
The banking sector has proved its ability to overcome the crises safely through its performance, which has seen stability and growth in past years.
The banking sector is working to implement the CBE’s instructions with regards to giving attention to financing the important economic sectors, especially labour-intensive activities, innovative projects, and value-added projects.
Banks operating within the banking sector, with the public banks on the top of them, have extensive experience in financing all development projects in all sectors as well as supporting them, whether through financing or participating in the anticipated investments.
With regards to your bank, what projects and activities is it focusing on financing to serve the economy?
Banque du Caire welcomes financing all major national projects which contribute to pushing the development process forward, out of national duty and for the elements of success these projects have as well as their relative advantages that increase their economic return. Moreover, these projects come as priority within the national development plan.
Banque du Caire is keen to participate in financing these sectors with the aim of supporting the economic and social development projects by being involved in any alliances to finance any of these projects or the syndicated loans, besides direct financing.
Banque du Caire pays special attention to all economic sectors, especially the electricity, petroleum, construction, renewable energy, food industries, and communications sectors.
The bank’s share in the loans it participated in during the first half of 2016 amounted to about EGP 8bn.
In the electricity sector, the bank succeeded in arranging a EGP 5bn syndicated loan for the Egyptian Electricity Holding Company (EEHC) to pay the dues it owes the Egyptian General Petroleum Corporation (EGPC). The bank contributed to that loan with approximately EGP 165m.
The bank also arranged a EGP 2.16bn syndicated loan for the Cairo Electricity Production Company to finance part of the investment cost of expanding West Cairo power plant, part of the investment cost of implementing the project of expanding 6th of October City power plant, and part of the investment cost of implementing the expansions of the North Giza power plant project. The bank contributed to that loan with approximately EGP 400m.
With regard to the constructions sector and within the framework of the state’s plan to develop the area of Suez Canal, the bank participated with EGP 300m in the EGP 2.35bn syndicated loan arranged for Concord for Engineering and Contracting company. The loan was arranged with the aim of designing and implementing three tunnels in Ismailia under the Suez Canal.
Furthermore, within supporting the state’s plan to provide housing units to low-income citizens, the bank participated by arranging the EGP 20bn loan granted to the Social Housing Fund. Moreover, it paid a share of EGP 6.5bn.
With regard to food industries, the bank participated with a share of EGP 300m in the EGP 2.5bn syndicated loan for the Holding Company for Food Industries to finance the needs of the company’s working capital to buy the food commodities offered through the subsidies system.
In the petroleum sector, an agreement was conducted between a group of banks and EGPC to provide the liquidity it needs through granting the Petroleum Trading Services company (Petrotrade) EGP 5bn loan through an alliance of 13 banks.
Banque du Caire participated in that loan by a share of EGP 450m with the aim of EGPC paying for gas and petroleum products imports.