The Central Bank of Egypt (CBE) announced that the banknote issuance to GDP percentage increased to 12.68% in February 2017, recording its highest level since June 2016, when it reached 13.64%.
The CBE said in its report that the total value of banknotes issued reached EGP 411.559bn in February, compared to EGP 405.416bn in January—an increase of EGP 6.143bn.
In June 2015, the banknote issuance to GDP percentage recorded 15.06%, its highest level during the last six years, while the lowest level was in November 2015, when it reached 12.17% of GDP.
According to the report, the CBE issued EGP 226.125bn worth of EGP 200 notes, EGP 144.943bn worth of EGP 100 notes, and EGP 27.857bn worth of EGP 50 notes.
The CBE also issued EGP 5.45bn in EGP 20 notes; EGP 3.015bn in EGP 10 notes; EGP 2.432bn in EGP 5 notes; EGP 1.176bn worth of EGP 1 notes; EGP 391m worth of EGP 0.50 notes, and EGP 170m in EGP 0.25 notes.
The CBE has been widely criticised due to the expansion in its issuance of banknotes. The banknote issuance in Egypt is subject to Banking Law 88/2003. Article 107 of this law stipulates that only the CBE is entitled to the banknote issuance. The CBE’s board of directors also has the right to determine the categories and specifications of the banknote issue.
There is an annual plan for the issuance of banknotes in accordance with the vision of the CBE and the government, in which it avoids the over-issuance of cash because it will lead to inflation and price hikes, while the decline of banknote issuance can affect the economic activity and reduce growth rates.
According to a previous statement issued by the CBE, the issuing of banknotes is based on the study and analysis of macro-economic variables—mainly the GDP. The CBE explained that it issues new banknotes to replace old or damaged banknotes, so as to preserve the Egyptian currency’s good image. This process does not lead to an increase of cash, refuting claims that the issuance of new cash aims to finance the state budget deficit.