Arab Republic of Egypt
2010 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Arab Republic of Egypt

This 2010 Article IV Consultation highlights that Egypt has weathered the global financial crisis relatively well and financial market pressures have eased after the initial outflow. Equity prices plateaued in recent months, after having recovered over half of the losses since the April 2008 peak. Egypt’s sovereign spreads tightened during 2009 and, in early 2010, remain well below their pre-Lehman levels. Reducing the fiscal deficit and public debt are key medium term objectives. Egypt’s public debt remains high in comparison with many other emerging market countries.


This 2010 Article IV Consultation highlights that Egypt has weathered the global financial crisis relatively well and financial market pressures have eased after the initial outflow. Equity prices plateaued in recent months, after having recovered over half of the losses since the April 2008 peak. Egypt’s sovereign spreads tightened during 2009 and, in early 2010, remain well below their pre-Lehman levels. Reducing the fiscal deficit and public debt are key medium term objectives. Egypt’s public debt remains high in comparison with many other emerging market countries.

Staff Appraisal1

1. Egypt’s economy has been resilient to the crisis. Financial contagion was contained by limited direct exposure to structured products and low levels of financial integration with world financial markets. Sustained and wide-ranging reforms since 2004 had reduced fiscal, monetary, and external vulnerabilities, and improved the investment climate. These bolstered the economy’s durability and provided breathing space for appropriate policy responses.

  • Financial market conditions have eased since the initial downturn. A sharp outflow of capital took place in the second half of 2008, as foreign investors pulled out of equity and government debt markets. Investors’ confidence in Egypt and appetite for risk have improved since March 2009, and the stock market reversed course, capital inflows resumed, and official international reserves have been rising.

  • Economic performance was better than expected, although headline inflation remains elevated. Growth fell only to 4.7 percent in FY2008/09 on the strength of consumption spending, and production in the construction, communications, and trade sectors. The first half of FY2009/10 provides further evidence of a pickup in growth and external demand. After falling rapidly from 24 percent, headline inflation has risen above 13 percent in recent months, although much of the impetus appears to be idiosyncratic. Core inflation remains within the central bank’s informal comfort zone.

2. Prompt fiscal and monetary responses helped cushion the impact of the post-Lehman slowdown. Additional infrastructure expenditures—some off-budget—provided a targeted and temporary stimulus. Also helping to limit the slowdown, interest rates were cut sharply. The rapid capital outflow in late 2008 was met mostly with a drawdown in official reserves and the Central Bank of Egypt’s (CBE’s) foreign currency deposits with commercial banks, limiting the impact on the Egyptian pound and real economy.

3. As the recovery gains strength, the focus of policies can shift back toward fiscal consolidation and other growth-oriented reforms. With growth expected to reach 5 percent in FY2009/10 and 5.5 percent in FY2010/11, the need for further stimulus is waning.

Fiscal Policy

4. The FY2009/10 budget is appropriately supportive, but budget execution should give regard to the pace at which activity rebounds. The government’s FY2009/10 fiscal deficit target of 8.4 percent of GDP is expected to be met on the strength of careful fiscal management. If revenues perform better than expected as a result of strengthening activity, it would be prudent to save these. While the large government borrowing requirement represents a potential risk, financing should be available without undue stress. Development of markets for longer-term government debt is under way. The authorities could also consider diversifying toward additional foreign financing. These steps can help lengthen the average maturity of the debt, reduce financing costs, and lessen pressures on the banking system to finance the budget.

5. The authorities’ objective of reducing the fiscal deficit to about 3 percent by FY2014/15 is critical to achieving private sector-led growth and reducing vulnerabilities. Reducing the overall deficit by about 5 percent of GDP over the next five years is feasible, based on the experience of other countries, and would lead to a further 15 percentage point decline in the debt-to-GDP ratio. Such adjustment will be crucial to maintain investor confidence, preserve macroeconomic stability, and create scope for future countercyclical fiscal policy. Anchoring the strategy in reforms to increase the low tax revenue-to-GDP ratio and the efficiency of public spending will help durably address Egypt’s main fiscal vulnerabilities. Priorities include adopting as early as possible a full-fledged VAT, complementing energy subsidy reform with better-targeted transfers to the most needy, and containing the fiscal cost of the pension and health reforms.

6. Staff advises that the FY2010/11 budget target a narrowing of the deficit compared to this year. A tightening of 1½–2 percent of GDP would provide an upfront signal to investors that progress toward the medium term objective is well under way, encouraging a more rapid private sector response to boost FDI and growth. While adopting major reforms could be challenging with the approaching elections—as evidenced by the delays in the property tax—staff encourages the authorities to continue taking measures such as strengthening tax compliance and reducing the cost of subsidy abuse, and also to resist pressures for additional spending.

Monetary Policy

7. While 12-month inflation is expected to decline in the coming months, the CBE should stand ready to tighten monetary conditions if inflation does not abate. As inflation ceased declining and output growth picked up, the recent decisions to keep rates stable were appropriate. Increases in headline inflation have been driven largely by fruit and vegetable prices. Such pressures are likely to be mostly idiosyncratic and not demand-induced. But persistently high headline inflation risks generating inflationary momentum through its effect on expectations. Bringing down inflation toward partner country levels should remain a key objective for the coming years. Staff welcomes progress in strengthening the monetary policy framework. The new core inflation measure and publishing the planned monetary policy reports will allow a better understanding of the CBE’s monetary policy decisions, and help improve its effectiveness.

8. Capital inflows, if continued, will complicate monetary policymaking. As the CBE has done in the past, sterilized intervention is the first option for hot money inflows, although this is expensive and unlikely to be effective if inflows persist. The CBE should also continue to allow greater exchange rate variability to limit one-way bets. Egypt’s real effective exchange rate is estimated to be slightly more appreciated than equilibrium, although these estimates are subject to uncertainties. The possibility that capital inflows could exert longer-lasting pressures for real appreciation reinforces the need for fiscal adjustment and productivity-enhancing reforms.

Reforms for Sustained Growth

9. Continuing the reform momentum and reducing fiscal vulnerabilities remain the key medium-term challenges. Rapid growth is crucial to tackling poverty and the high level of unemployment. In this context, reinvigorating the structural reform agenda should help raise productivity and reinforce Egypt’s competitiveness.

  • Prioritizing reforms that promote macroeconomic stability and improve the investment climate will support the resumption of foreign direct investment. As noted, the planned fiscal adjustment and tax reforms are an important element of generating confidence, improving the business environment, and ensuring space for the private sector. Resumption of privatization and development of public-private partnerships (PPPs) will help mobilize private sector financing and know-how. Contingent liabilities associated with PPPs, however, should be monitored closely.

  • Reinforcing financial soundness and promoting financial sector deepening will help mobilize savings needed to finance private sector-led growth. The stability of the financial sector during and since the crisis is a testament to reforms since 2004. Staff supports the continuation of reform efforts with the CBE’s Phase II agenda. Introducing Basel II standards and supporting financial sector development will help facilitate intermediation of savings and increase private sector access to credit. Staff supports plans to adopt additional prudential measures to contain vulnerabilities that will arise with greater integration with the global economy and the introduction of new asset classes. Close coordination between the new nonbank supervisory authority and CBE will be a priority, and consideration should be given to introducing forward-looking risk management and developing global standards on liquidity and leverage.

  • Strengthening data quality and transparency will help improve the policy debate and business environment, and enhance Fund surveillance. The need for greater transparency and higher frequency data was underscored by the global financial crisis, and enhancements would help ensure that data availability is on par with other emerging markets. In particular, there is a need for more robust CPI and GDP deflators, and for publishing higher-frequency aggregate financial soundness indicators (as planned), and encouraging banks to make available detailed performance and soundness indicators.

10. It is expected that the next Article IV consultation will be held on the standard 12-month cycle.

I. Background and Analysis: Crisis Management

11. Egypt made significant progress in wide-ranging structural reforms that accelerated after 2004. This spurred rapid output growth—averaging 7 percent a year during FY2005/06–FY2007/08—underpinned by foreign investment-driven productivity gains and the favorable external environment. Reforms also reduced fiscal, monetary and external vulnerabilities, leaving some room to maneuver on macroeconomic policies in the event of negative shocks.

12. Egypt weathered the global financial crisis relatively well. Financial market pressures eased after the initial outflow in late 2008/early 2009.

Following the Lehman shock, foreign investors withdrew from Egypt’s equity and government debt markets, with foreign T-bill holdings declining by over 80 percent by April 2009.

The stock market decline continued through February 2009, with losses reaching 70 percent relative to the April 2008 peak. Having recovered over half these losses by November 2009, equity prices have plateaued in recent months, but withstood the initial Dubai World fallout.

After peaking in late 2008, Egypt’s sovereign and CDS spreads tightened during 2009 and, in early 2010, remain well below their pre-Lehman levels and, on average, below other emerging markets.


T-Bills Held by Foreigners, 2005–2009

(Billions of US dollars)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Stock Market Prices, 2008–2010

(Index values; Jan. 1, 2008=100)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Bond Spreads, 2008–2010

(Basis points)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

13. The temporary financial outflow was met mostly with a drawdown in reserves, reversing the buildup in 2006–07 and limiting the impact on the Egyptian pound and real economy.

Cumulative outflows reached about US$14 billion. They were financed by a drawdown in net international reserves and the central bank’s foreign currency deposits with commercial banks. The exchange rate depreciated by about 6 percent during October 2008–March 2009.

Capital inflows resumed in April 2009 and official reserves (alone) have been rebuilt to pre-Lehman levels (US$34 billion at end-January 2009).

14. The real economy held up relatively well in the face of weaker external demand.

Crisis-related spillovers appear relatively smaller for Egypt than other countries with similar income levels, partly reflecting lower global economic integration and financial sector resilience (Box I). Similarly, the immediate financial impact of developments in Dubai last November was minor and temporary, and the direct real effects appear limited.

Although the current account moved into deficit (2.4 percent of GDP in FY2008/09) as service receipts and remittances declined, and investment and activity softened in exposed sectors, growth still reached 4.7 percent in FY2008/09, down from 7 percent in FY2007/08.


International Reserves, 2005–2010

(Billions of US dollars)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


FDI and Portfolio Inflows, 2005/06–2009/10

(Percent of GDP, quarterly equivalent)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Real GDP Growth, 2002/03–2009/10

(Factor cost base; percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Spillovers of the Global Crisis to Egypt

Declining export demand, remittances, and capital inflows are the principal channels through which crises in advanced economies affect emerging market economies like Egypt. Using a model capturing all three routes by the Generalized Method of Moments using quarterly data from 2002–09, staff estimated the spillovers of the recent global crisis to Egypt. “Spillovers” are defined as the negative contribution of external factors—increased financial stress in advanced economies and the slow-down in trading partner growth—to output growth after the Lehman shock. The external demand channel is proxied by economic activity in trade partners, and the Fund’s financial stress index (FSI, presented in Chapter 4 in Spring 2009 WEO) can help somewhat capture the latter two channels.

While spillovers explain most of the declines in output growth in Egypt and other countries with similar income levels, the estimated spillovers have been relatively smaller for Egypt.1 This appears to be due, in part, to:

  • relatively low private credit growth in Egypt prior to the crisis (partly reflecting banking sector asset restructuring during 2004–07), while cross-country experience suggests that too rapid credit growth has tended to magnify the impact of negative external shocks (chart, below left) and

Estimated Spillovers of the Global Crisis 1/

(Change in output growth, percentage points)

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“Spillovers” are defined as negative contribution of external factors (increased financial stress in advanced economies, decline in economic activity in trade partners and any other global factors) to the declines in growth after the Lehman shock.

Including spillovers of increased financial stress in advanced economies through a decline in output growth in trade partners, because of the strong correlation between financial stress in advanced economies and growth in the trade partners.

Excluding a decline in output growth caused by increased financial stress in advanced economies.

  • Egypt’s exports of goods and services were less sensitive to declining global economic activity, including in such sectors as tourism, fertilizers, and clothing, despite no substantial difference in trade partners’ output growth (chart, below right).


Pre-Crisis Credit Expansion and GDP Growth

Changes in output growth after the Lehman shock (Q4 2008–Q2 2009 compared to Q1 2006–Q3 2008, percentage points)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Non-oil Exports of Goods and Services

(Share of GDP, percent)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

1/ Colombia, Indonesia, Morocco, Peru, Philippines, South Africa, and Thailand based on the following criteria: GNI per capita in 2007 between US$1,500 (Egypt) and US$6,000; and the financial stress index estimated by the IMF’s Research Department (

Resilient domestic consumption demand, and production in the construction, communications, and trade sectors, helped sustain growth and the pick-up to nearly 5 percent in the first half of FY2009/10. The buoyancy of household expenditures during the crisis may reflect a more limited impact on permanent income given confidence in Egypt’s strong future growth prospects, and the relatively low level of private credit to businesses and households as a percentage of GDP.

15. Fiscal policy helped cushion the impact of the crisis.

The government reacted quickly by providing a sizable fiscal stimulus in the second half of FY2008/09, while temporarily postponing key fiscal reforms. The stimulus focused mainly on accelerating investment projects (about 1 percent of GDP) and public-private partnership (PPP) investments (1 percent of GDP).2

With mid-year expectations of comfortably overperforming the budget target by 0.7 percent of GDP, the government used this space to implement the stimulus while keeping the annual deficit in line with the 6.8 percent of GDP target.3

Policy Responses to the Global Financial Crisis

The Egyptian authorities responded swiftly to cushion the impact of the global financial crisis and emerging slowdown.

  • In FY2008/09, the government undertook additional (mainly infrastructure) expenditure of about 1 percent of GDP. In FY2009/10 fiscal policy remains supportive, with an expected widening of the budget deficit by 1½ percentage points of GDP.

  • In October 2008, the CBE reiterated the 100 percent guarantee of local bank deposits to help maintain confidence, and imposed reporting requirements on overseas deposits and investment balances to help monitor unexpected movements in financial flows.

  • The CBE cut overnight deposit and lending rates six times between February and September 2009, by a cumulative 325 bps and 375 bps, respectively.

  • The authorities allowed some additional nominal exchange rate flexibility, with the pound depreciating by about 6 percent between September 2008 and March 2009, and subsequently appreciating (with resumed capital inflows) almost to its pre-crisis level.

The government also postponed key fiscal reforms—introducing the property tax, broadening the VAT, and phasing out energy subsidies—although these were not budgeted to have an impact in FY2008/09.

Sufficient banking sector liquidity and banks’ appetite for T-bills after the crisis allowed the government to continue relying on shorter-term domestic securities to finance the deficit without major rollover difficulties, albeit with a temporary increase in the average yield during October-November last year.4

16. The FY2009/10 budget continues to support economic activity, reflecting a moderate deterioration in the cyclically adjusted primary balance relative to comparable countries in the region (see figure).

The budget targets a wider deficit of 8.4 percent of GDP largely reflecting a substantial projected cyclical fall in revenue (particularly from trade and Suez Canal traffic), as well as the impact of wage increases adopted before the crisis and higher post-crisis debt service costs.

The government is seeking parliamentary approval for additional infrastructure spending (0.8 percent of GDP) to be carried out by the autonomous urban development agency over 5 years. Investments by the urban development agency are commercial activities and do not affect the budget deficit.


Change in Cyclically Adjusted Primary Balance, 2009

(Percent of GDP)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Fiscal Impulse and Automatic Stabilizers, 2002/03–2009/10

(Percent of GDP)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Loan / Deposit Ratio, 2004–2009

(Percent, excluding government sector)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

17. Comprehensive pension and health reforms are underway.

Pension reforms aim to strengthen the system’s sustainability and efficiency by establishing a new defined-contribution system, plus substantial parametric reform of the existing defined-benefit system.

Health reform seeks to improve quality, and unify the fragmented financing and delivery of health services by adopting universal health insurance.

The focus on self-financing schemes, with limited and well-targeted government subsidies should help avoid jeopardizing fiscal consolidation. Pending cabinet discussions, the reforms could be submitted to parliament within the next two years.

18. Supportive monetary policy and a legacy of banking reforms also helped resist crisis-related pressures.

The CBE cut policy rates six times between February and September 2009. Consistent with lower commodity prices and weaker demand, both headline and core inflation5 declined rapidly from peaks in August 2008 to single digits (9 percent and 5.8 percent, respectively) by August 2009.

The deceleration of inflation stalled, with headline inflation rising above 13 percent since October 2009. However, this outturn is related to supply shocks in several food categories, and core inflation remains in single digits and inside the CBEs comfort zone.6 Accordingly, the CBE shifted to a more neutral stance, keeping rates unchanged in the past three Monetary Policy Committee meetings.7

CBE Monetary Policy Committee Decisions, 2009–10

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Source: Central Bank of Egypt.

Nominal Interest Rates, 2007–2010


Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Real Interest Rates, 2003–2010

(Percent; ex-post, based on actual headline inflation)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Real ex-post policy rates remain negative—although close to zero—and bank lending and deposit rates remained largely unchanged despite cuts in policy rates. Nevertheless, the growth of private sector credit slowed substantially—falling to 5 percent in FY2008/09 compared to 12½ percent in FY2007/08—driven largely by weaker demand for credit, as exporters faced lower external demand and businesses deferred investment expenditures. Liquidity remains ample, with a loan to deposit ratio holding at around 50 percent and substantial excess reserves (despite having declined since mid-2008).

The CBE’s Phase I reforms (2004–08)—strengthened supervision, restructuring and consolidation, and a cleanup of NPLs—reduced financial vulnerabilities. Also, limited reliance on short-term wholesale funding channels and relatively traditional portfolios, allowed Egyptian banks to sidestep many of the detrimental effects of the crisis. While the financial system remains stable, the CBE’s Phase II reforms (2009–11) will implement the Basel II framework, along with other prudential measures designed to limit excessive risk build up within the financial sector.


Private Sector Credit Growth, 2005–2009

(Percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Private Sector Credit Growth by Currency, January 2008–October 2009

(Percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Banking Sector Indicators

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Source: Central Bank of Egypt

Fiscal years ends June 30 for public sector banks, and December 31 for other banks.

II. Changing Policy Gears Post-Crisis

19. The near-term macroeconomic outlook appears favorable.

Growth is projected to pick up further to 5 percent and 5.5 percent for FY2009/10 and FY2010/11, respectively), reflecting the nascent recovery in global demand and investment in Egypt, and continued strength in household consumption.

Following recent declines in monthly inflation, headline inflation should continue to ease over the remainder of FY2009/10, particularly in the absence of any pronounced demand pressures, or further supply shocks or regulated price adjustments. This should narrow the wedge with core inflation, which should remain within the CBE’s comfort zone.

While the recovery in external demand should help stabilize exports including tourism, domestic demand driven imports will likely keep the current account in deficit (2.6 percent of GDP). The continued, albeit gradual, resumption of FDI and portfolio inflows should see official reserves increase slightly over the remainder of the fiscal year.

20. As output growth picks up and approaches potential growth, the need for policy stimulus will wane.

Egypt’s potential growth is currently estimated at around 5–6 percent (about 1 percentage point lower than pre-crisis), reflecting the fallout from lower potential output in advanced economies post-crisis (Box II).

With growth continuing to surprise on the upside, higher-than-expected inflation, capital flows resuming, and the output growth approaching potential, the authorities will need to shift policy gears.

Rather than containing the negative spillovers of the crisis, the focus of policy should be addressing fiscal vulnerabilities and structural rigidities, thus positioning the economy to take advantage of the global recovery and its position of economic strength starting this year.


Real GDP Growth Projections, 2006/07–2010/11

(Percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Headline and Core Inflation, 2005–2010

(Percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Potential Output Growth in Egypt

The global crisis affects Egypt’s medium-term growth prospects through lower demand for Egypt’s exports (goods and services) and tighter financing conditions for investment. The latter slows capital accumulation and technology transfers associated with lower FDI inflows, and results in lower labor productivity growth.

Estimated potential output derived from the univariate Kalman filter, assuming AR(2) process in the output gap and a drift in potential output (to incorporate changes in potential output caused by external factors),1 indicates;

  • Potential output growth increased from below 5 percent before 2004 to over 6 percent in FY2005/06–07/08, reflecting increased productivity due to the economic reforms since 2004, strong external demand, large private capital inflows, and a competitive real exchange rate after the large devaluation in 2003;

  • Potential output growth declined after the Lehman shock from over 6 percent to slightly above 5 percent, in line with declines in potential output in advanced economies;

  • The output gap—defined as the deviation of actual output from its potential level—narrowed after its peak of about one percentage point in the middle of FY2007/08, reflecting a decline in potential output growth after the Lehman shock; and


Potential Output Growth, 2003–2009

(Percent, yoy growth)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Estimated Output Gap, 2003–2009

(Deviation from potential output, percent)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

  • The decline in potential growth in the near term reduces the level of potential output in the near term, but not the medium term growth rate of potential. The slowdown in potential output growth will reduce the output level by about 5 percentage points by 2014 (compared to potential output growth during FY2005/06–07/08), assuming that potential growth gradually returns to 6 percent by 2014.

1/ Potential output (ytp) is specified as ytp=yt-1p+μt+εtp where μt is a drift factor capturing exogenous factors (external financing conditions) for Egypt, and εtp represents other shocks.

21. Recent fiscal policy has been geared toward supporting growth.

The FY2009/10 budget struck a reasonable balance. Premature withdrawal of the fiscal stimulus could undermine the recovery. But the risks posed by the high debt and fiscal financing requirement, and better-than-anticipated growth prospects, weaken the case for further stimulus.

At this stage, saving any revenue over-performance (projected near 0.3 percent of GDP)—together with renewing fiscal reform efforts—would help manage the appropriate pace of withdrawing the fiscal stimulus and ameliorate the fiscal risks. With higher spending on fuel subsidies financed with transfers from the state-owned petroleum company, and lower-than-budgeted spending on wages and interest payments largely offsetting an unanticipated fall in grants, it should be feasible to contain the deficit to 8.1 percent of GDP.

22. Fiscal adjustment should resume with the FY2010/11 budget.

The FY2010/11 budget should aim to begin delivering substantive fiscal adjustment-of about 1½–2 percentage points of GDP)—to help engender confidence in the authorities’ commitment to medium-term adjustment and help provide the buffer for future shocks. The budget, currently being prepared by the authorities, is likely to target a smaller adjustment, with a deficit in the order of 7.9 percent of GDP, as planned reforms (including the real estate tax and VAT) have been postponed until after the presidential elections. Staff considers that, even without major policy measures, the deficit could be contained to 7.6 percent of GDP. It will also be important to resist pressures in the context of the forthcoming elections, both on expenditures or further delays of key fiscal reforms.


Gross Public Debt, 2001/02–2009/10

(Percent of GDP)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Outstanding Stock of Treasury Securities, 2003/04–2008/09

(Percent of GDP)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Share of Bank Credit to the Government, 2001/02–2009/10


Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

23. Changes in debt management will also help reduce risks associated with the large rollover requirement.

The substantial and rising short-term rollover requirement (above 20 percent of GDP) is a source of potential risk, should Egypt’s financing conditions deteriorate. Increasing the average maturity of government debt issues is already under way. Also, with Egypt’s relatively small external debt ratio, seeking external financing on favorable terms would help to lower financing costs and lengthen maturities, and reducing reliance on the banking system could free resources for the private sector.

The Authorities’ Views:

The authorities assured on the importance of resuming fiscal consolidation in FY2010/11 provided sustained stability and improved growth prospects in the world economy. The Ministry of Finance is currently working on reducing the targeted deficit ratio for next year below the 8.4 percent deficit target for FY2009/10, while taking additional measures where possible during the year, including by rationalizing the consumption of subsidized butane. The authorities highlighted the fact that the debt-to-GDP ratio was successfully maintained in midst of the global crisis and despite the adoption of countercyclical fiscal policy measures for two consecutive fiscal years.

24. Absent further declines in inflation, the CBE may need to consider raising policy rates to avoid inflationary pressures becoming more generalized.

The recent interruption in cuts to policy rates was appropriate. As fruit and vegetable prices, and movements in regulated prices account for about two-thirds of recent headline inflation, staff considers that the CBE’s new core inflation provides a better measure of underlying inflationary pressures. This suggests that events underlying recent headline inflation have not yet spilled over into more widespread inflationary pressures. In this regard, the CBE should continue to communicate to the public that recent increases in headline inflation are temporary. But given the uncertainty, and that output growth is approaching potential, further increases in policy interest rates may prove necessary if sustained high headline inflation begins to fuel inflationary expectations.

25. Further reductions in inflation are needed over coming years to help align Egypt with its trading partners.

The CBE’s inflation reports and informal comfort zone are providing a guide for expectations, although the exchange rate will continue to play an important role in expectations formation for some time to come.

The higher level and variability of inflation since 2004 (chart) attests to the importance of moving to full inflation targeting as fiscal pressures abate. In this context, low and stable inflation should be the primary objective of policy in the coming years. This would also require allowing more exchange rate flexibility and full operational autonomy of the CBE.


Headline Inflation, 1999–2010

(Percent change, yoy)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Exchange Rate Assessment

The real effective exchange rate appreciated by over 25 percent since the benchmark period for the last exchange rate assessment (end-2007) and now appears somewhat overvalued under each of the standard metrics.

Given uncertainties surrounding these estimates—particularly with recent and prospective structural changes in the economy—and that the authorities expect inflation to abate further in the coming months, this does not yet pose a clear-cut threat to competitiveness.

Egypt: Assessment of the Real Effective Exchange Rate

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Estimates the adjustment needed to stabilize Egypt’s net foreign assets to GDP ratio at its end-FY2008/09 level, using CBE data sourced from IFS.

Based on data for Egypt’s financial year (July 1–June 30), including for the real effective exchange rate.


Effective Exchange Rates, 2002–2009

(Index values; January 2008=100)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Changes in Egypt’s Share of World Nonoil Exports & REER, 1987–2008

(Index values; 1990=100)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Non-oil export performance has been impressive in recent years, gaining market share even as the real exchange rate has appreciated, suggesting that reforms have helped productivity growth. Moreover, survey-based competitiveness indicators suggest that, notwithstanding remaining weaknesses, impediments have been reduced in recent years (also see paragraph 30).

26. Continued capital inflows would pose a challenge for monetary and exchange rate policy.

Egypt’s attractive T-Bill yields have encouraged a resumption of short-term capital inflows, albeit less than in 2007 and 2008 (see chart on page 7). While competitiveness is not yet a problem, further real appreciation driven by short term capital flows could weaken medium-term growth prospects.8

Sterilized intervention—the main recourse during the 2006–07 inflows-is an appropriate response to short-term inflows while they remain small and potentially temporary. Maintaining exchange rate flexibility will be an important element of the response, to limit the perception of one-way bets. If inflows are large and sustained, then other options may need to be considered, including assessing the adequacy of prudential measures to deal with associated risks. Fiscal consolidation, by reducing interest rates, will help reduce pressure for inflows over time.

The Authorities’ Views:

The authorities are of the view that recent price pressures were driven largely by isolated events—including some related to supply side rigidities—and inflation should begin to trend down in the period ahead. They emphasized that, in the past 6–12 months, these price shocks had not spilled over into underlying inflation pressures. Nevertheless, the CBE stands ready to tighten monetary conditions should generalized inflation pressures emerge.

The authorities expressed their commitment to a flexible exchange rate arrangement, pointing to the additional flexibility observed in the wake of the crisis and especially in the past six months. At the same time, they underscored the importance of protecting the economy from excessive volatility, including if driven by hot money inflows, and agreed with the merits of sterilized intervention as a temporary response.

III. Improving Medium-Term Growth Prospects

27. Continued broad-based reforms are needed to generate inclusive, employment-generating growth.

A return to sustainable rapid growth of 6–7 percent—supported by raising total factor productivity—is needed to address Egypt’s persistent high unemployment rate and continue to make in-roads into reducing poverty.9

A revitalized reform agenda should be framed around two broad pillars: addressing fiscal vulnerability and ensuring macroeconomic stability to help maintain confidence and prevent imbalances; and broad-based structural reforms to strengthen the economy’s dynamism. Attracting more FDI and the associated technology transfers, will boost productivity and potential output growth, allowing Egypt to realize higher growth rates accommodating real appreciation pressures that could undermine competitiveness and be counter-productive.


Unemployment, 1990–2009

(Percent of labor force)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Changes in Unemployment and Growth, 2000/01–2008/09

(Change in unemployment rate, percentage points)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

A. Managing a Large Fiscal Adjustment

28. Resuming medium-term fiscal consolidation is crucial to addressing fiscal vulnerabilities and encouraging private investment.

Fiscal vulnerabilities are Egypt’s main macroeconomic risk. Gross public debt remains high by emerging market standards and fiscal financing requirements have averaged around 25 percent of GDP in recent years. If the current stimulus is not unwound, sustained high fiscal deficits could add to inflation, curtail the scope for future countercyclical fiscal policy, increase rollover risks, and put upward pressure on financing costs and the real exchange rate. Also, continued heavy reliance on domestic bank financing could impede financial sector development, raise the cost of financial intermediation, and limit private sector access to financing.

While staff would have preferred a more front-loaded adjustment, the planned 5 percentage point of GDP reduction in the budget sector deficit by FY2014/15 (three years later than envisaged pre-crisis), should reduce gross public debt substantially to about 60 percent of GDP (Appendix I).

Increased tax revenues (3 percentage points of GDP) will be central to the adjustment, supported by adopting a full-fledged VAT, modernizing the property tax, and broadening the income tax base. In this regard, peak of adjustment should come in FY2012/13, with the full year effect of the VAT, following its introduction in late FY2011/12.


Debt Burden Indicators, 2009

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Summary of Budget Sector Fiscal Operations, 2008/09–2014/15

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Source: Ministry of Finance and Fund staff estimates.

Average Tax Revenue Ratio, 2008–09

(Percent of GDP)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

Ongoing energy subsidy reform (Box III) would help reduce spending inefficiencies and provide more room for spending on priority social and infrastructure needs. The government is also reforming the pension and health systems10 with a view to strengthening their long-term sustainability and efficiency.

29. While challenging, the medium-term fiscal strategy seems feasible especially based on international experience with successful fiscal adjustments (Box IV).

Feasibility hinges on the prompt resumption of key reforms, and containing the fiscal costs of pension and health reforms as final design choices are made. Given the relatively sizeable adjustment, the intended gradual approach set in a broader reform agenda should lend credibility to the feasibility and durability of the change in the direction of fiscal policy. In this regard, reliance on tax revenue-enhancing measures should help build confidence.

Despite past efforts to rationalize fuel subsidies, domestic fuel prices remain well below international prices11 and prices in selected neighboring countries (Box III). Subsidy reforms should be a priority and, if done in conjunction with adopting an automatic price adjustment mechanism or price liberalization (Jordan and Lebanon, respectively), their credibility would be enhanced.

Reforming the fiscal framework could reinforce confidence, foster wider buy-in, and facilitate monitoring of the consolidation process. These could include: broadening the focus of fiscal policy to incorporate economic authorities conducting non-commercial operations currently outside the budget coverage; implementing a full-fledged medium-term budget framework; and tightening expenditure controls.

The Authorities’ Views:

Despite improvements in receipts of several tax types as achieved by recent tax reforms, the authorities acknowledge that constraints are still posed by low tax revenue-to GDP ratio for several other tax types. In order to meet their objective of reducing the overall budget deficit to about 3 percent of GDP, the authorities point to the need for a balanced adjustment, composed of further revenue and spending measures. They look forward to broadening the tax base, with the full impact of adopting a full-fledged VAT expected in FY2012/13, following its planned submission and approval in late 2011. They also hope to resume the reform of fuel subsidies in 2011, after crisis impacts will have fully subsided.

The authorities stressed their commitment to careful due diligence in the decision making and monitoring process for PPPs, with particular regard to containing potential fiscal risks.

Energy Subsidies in Egypt

A large share of government spending consists of inefficient and costly energy subsidies.1 Notwithstanding the recent (and temporary fall) in international oil prices, more than a quarter of primary spending and about two-thirds of government subsidies are attributable to a few petroleum products (gasoline, diesel, LPG, kerosene, and fuel oil). In addition to crowding out priority spending on social and infrastructure needs, subsidies are highly regressive. Studies by the World Bank and the USAID provide evidence of the disproportionate benefits to higher income households (almost twice as much for low income households).

Energy Subsidies in Egypt, 2005/06–2008/09

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Sources: Ministry of Petroleum, Ministry of Finance, EGPC, EGAS, CBE, and Fund staff estimates.

The budget spending for 2008/09 also reflects the repayment of debt due to the deficits of EGPC from the previous years. Therefore despite the fact that the cost of subsidies is lower, the budget spending remains high.

Restructuring energy subsidies has been a key objective of the government’s post-2004 reforms. In addition to several ad-hoc domestic fuel prices adjustments since 2004, the government launched in late 2007 a plan to bring energy prices close to actual costs by 2010. The plan entailed an immediate increase in the energy prices for energy-intensive industries and a one-year grace period for non-energy intensive industries. However, during late 2008 and in the context of the crisis, the government extended this grace period until early 2010 and announced that the elimination of fuel subsidies would be postponed to 2014. At the same time, the government announced a coupon scheme to improve the targeting of the LPG subsidy.

Notwithstanding the restructuring efforts, products consumed by higher income families—such as diesel and regular gasoline—remain highly subsidized. Successive ad-hoc increases in domestic prices have fallen short of passing through international price increases and some prices remain well below international prices and prices in selected neighboring countries.


Diesel Prices in Egypt and Neighboring Countries, 2006–2008

(US dollars per liter, end of period)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001


Egyptian and International Diesel Prices, 2005–2009

(US cents per liter)

Citation: IMF Staff Country Reports 2010, 094; 10.5089/9781455207497.002.A001

1/ Since FY2005/06, the government started to report notional expenditures on fuel subsidies which are financed directly by the Egyptian General Petroleum Company out of its required transfers to the budget for income taxes, royalties and dividends.

Successful Fiscal Adjustments Around The World: Lessons for Egypt

A rich literature identifies factors underlying successful fiscal adjustments.1 Several studies have examined many episodes of fiscal consolidation undertaken by industrial, emerging market, and developing countries over the past four decades, using statistical and econometric analyses as well as case studies. “Fiscal adjustments” are usually defined as successive improvements of the cyclically adjusted primary balance or the primary balance over 3 years and “successful adjustments” as episodes associated with sustained improvements in the (cyclically adjusted) primary balance or durable declines in public debt.

Six key lessons for Egypt emerge from the empirical evidence about successful fiscal adjustments:

Lesson 1: Engaging in an ambitious medium term fiscal adjustment, which is less likely to be reversed, may signal a government’s commitment to address fiscal problems and change the direction of fiscal policy. Successful fiscal adjustments in Brazil, Ireland, Lebanon, Lithuania, Russia, and South Africa in the late 1990s/early 2000s targeted fiscal deficit reductions between 6–11 percent of GDP (Tsibouris et. al., 2006; Purfield, 2003).

Lesson 2: Adopting a gradual consolidation strategy, rather than sharp and short adjustments, allows the introduction of higher quality and more durable measures with lower political resistance and highlights the existence of lags between adoption and full impact of adjustment measures. Successful adjustments in Finland, Sweden, and Spain during the late 1990s were carried out over periods of up to a decade (Kumar et. al., 2007).

Lesson 3: Expanding the tax base to boost revenue through policy measures and improved tax compliance helps enable long-lasting consolidations and address a key fiscal vulnerability of narrow tax bases (prevalent in low income countries). Increases in VAT and excises accounted for a large share of Ireland’s fiscal consolidation in the early 2000s (Kumar et. al., 2007).

Lesson 4: Relying on core current expenditure cuts—such as reducing the public sector wage bill and inefficient transfers—raise credibility of a government’s ability to tackle key spending pressures and address fiscal imbalances in a sustainable manner. Brazil’s successful adjustment in late 1990s entailed reducing generous pension benefits and strengthening social safety nets (Tsibouris et. al., 2006).

Lesson 5: Strengthening fiscal institutions—i.e., medium-term fiscal frameworks and effective expenditure control—can provide a road map for consolidation and support implementation. Medium-term fiscal policy frameworks were instrumental in Brazil, Lithuania, and New Zealand, and strengthened expenditure management supported adjustment in Lebanon, Russia, and South Africa (Tsibouris et. al., 2006).

Lesson 6: Fiscal consolidation, accompanied by a broader package of structural reforms will boost credibility and sustainability given the need for political consensus and the more permanent changes in revenue and spending triggered by reforms. Structural reforms both on revenue and spending side played a key role in the consolidation strategies of several EU member states ahead of the inception of the economic and monetary union (Larch et. al., 2008).

1/ Studies include: Alesina, A., et. al., 1997, “Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects,” IMF Staff Papers; Kumar, M., et. al., 2007, “Fiscal Adjustments: Determinants and Macroeconomic Consequences,” IMF WP/07/178; Tsibouris, G., et. al., 2006, “Experience with Large Fiscal Adjustments,” IMF, OP 246; OECD, 2007, “Fiscal Consolidation: Lessons from Past Experience,” Economic Outlook, No.81; Larch, M., et. al., 2008, “Received wisdom and beyond: Lessons from fiscal consolidation in the EU,” EC; Gupta, S., et. al, 2004, “The persistence of fiscal adjustment in developing countries,” Applied Economic Letters 11; Purfield, C, 2003, “Fiscal adjustment in transition countries: evidence from the 1990s,” IMF WP. 03/36; Gupta, S., et. al., 2004, “What sustains fiscal consolidation in Emerging Markets?,” IMF WP 03/224.

B. A More Competitive Economy

30. Further improving the investment and business environment will be crucial to achieving a competitive edge in the post-crisis global economic environment.

The post-2004 reform agenda has begun to pay dividends. The World Bank’s 2010 Doing Business report identifies Egypt as among the top reformers, emphasizing improvements in starting a business and regulation, and access to credit. Also, Egypt moved up 11 places in the World Economic Forum’s 2009–10 Global Competitiveness Report (GCR), reflecting mainly “recent liberalization efforts” including improvements in infrastructure.

However, its relative position still remains at 70 (of 133 countries). The GCR identified macroeconomic stability and banking system solidity as key structural impediments. Transparency International cites accountability and transparency, and weaknesses in the legal/regulatory system as key reasons for Egypt remaining 111th of 180 countries on its Corruption Perception Index.

Decisive action to continue the earlier reform momentum should focus on addressing the remaining structural weaknesses. In addition to sound macroeconomic policies, efforts should focus on:

  • Resuming privatization and increasing the role of carefully structured and appropriately priced PPPs should assist fiscal adjustment and mobilize private resources for infrastructure investment. Shifting out of business activities better suited to the private sector should also help give greater credibility to the government’s efforts to instead focus on establishing a sound legal and regulatory framework.

  • Reforms supported by the Bank, including further improving the financial sector and infrastructure, and raising human capital.


The planned medium term fiscal consolidation tackles the central fiscal vulnerabilities. While the large domestic debt rollover requirement (about 20 percent of GDP) remains a potential risk, the banking system remains liquid. However, slower implementation of key fiscal reforms and adjustment path would delay the reductions in debt and rollover requirements, and could hinder the response of private sector-led growth.

While PPPs can help mobilize private sector financing and know-how for infrastructure investment, these projects will need to be carefully managed and structured to contain risks, including limiting potential contingent liabilities, within a sound institutional framework as the one provided in the PPP law that is now before Parliament.

Direct banking sector risks are well contained following the banking reform. NPLs stood at 14.7 percent of total loans in September 2009, virtually unchanged from before the crisis. However, several potential risks—including market concentration and the prospective use of more sophisticated products—will require careful watching to ensure sound financial sector development, including the ability to increase and effectively allocate private sector credit, and diversify risks.

31. Continued financial sector reforms are needed to help contain risks, build investor confidence, and support private sector-led growth.

Increasing financial competition, lowering risk, and providing regulatory certainty will make Egypt a more attractive destination for investment, deepen markets, and facilitate the access to capital needed to support future growth.

Improving intermediation and competition within the sector—not well developed compared to other emerging markets (private sector credit has averaged around 40 percent of GDP in the past 5 years)—is needed to effectively and productively channel resources to the private sector. Over time, this will serve as an important source of financing for private investment to complement the current heavy reliance on FDI and self-financing.

To this end, the CBE’s Phase I reforms made considerable progress in increasing the efficiency of, and reducing risks in, the banking sector. By continuing with a forward-looking approach to risk assessment and other measures to limit risk as the sector evolves (Box V), Phase II reforms should further enhance financial sector soundness and efficiency, and its role in supporting growth.

The Authorities’ Views:

The authorities highlighted their successful track record in implementing financial sector reforms and their continued commitment to Phase II reforms, emphasizing the role of banking system stability and access to financing in promoting growth. They identified the comprehensive implementation of Basel II standards, along with some additional prudential measures focused on risk mitigation and capacity building, as key pillars. They also expressed their intention to publish in the coming year higher frequency aggregate financial soundness indicators and, over time, encourage banks to make available detailed performance and soundness indicators.

32. Further improvements are needed in the timeliness, coverage and availability of economic and financial statistics to complement other improvements in Egypt’s macroeconomic policy framework, and provide greater policy accountability and regulatory certainty. This is particularly important given general concerns about data gaps highlighted by the global financial crisis. Despite advancements in Egypt’s data availability (e.g., core inflation, publication of the CBE’s reserve template on the Fund’s website), weaknesses linger in numerous areas (such as internal and time consistency of GDP data, quality and consistency of CPI and GDP deflators, lack of coverage of off-budget fiscal entities, lack of survey data for direct investment), and limited high frequency data across all sectors (e.g., retail sales and real estate prices).

Financial Sector Reform Priorities for Egypt

Phase I of the CBE’s Financial Sector Reform Program (2004–08) has produced tangible results, with most recommendations of the 2002 FSAP being implemented. The financial sector has benefited, largely escaping the global financial crisis, and with increased investment by both local and foreign market participants, particularly as new segments (mainly securities) become active.

  • Comprehensive and coherent bank restructuring measures increased the efficiency of the banking sector, and reduced vulnerabilities and balance sheet burdens. Most notably:

    • - Enforcement of minimum capital requirements and other standards have reduced banks operating in Egypt by 31 percent through forced and voluntary mergers.

    • - The soundness of remaining state owned banks has been assessed in line with international accounting standards. Functional and trained risk, information technology, and human resources departments have been established at banks to mitigate future risk and deterioration, and mandatory risk and performance reporting to the CBE is in full effect.

    • - Significant resolution of non-performing loans has taken place and public sector entity debt resolution is under way.

  • The regulatory and supervisory framework has been transparently updated, with the stated aim of promoting competitiveness, and reducing risks. For example:

    • - Rules and regulations governing the financial sector are published regularly and clearly, including efforts to align accounting, disclosure, reporting and measurement standards with international codes.

    • - The capacity of regulators and supervisors to address risks and transmission mechanisms is being enhanced. For example, consolidation of regulatory and supervisory authority over non-bank entities, as well as the training for regulators and supervisors to qualitative and quantitative techniques.

Building on these actions, Phase II reforms (2009–11) will further modernize prudential oversight, spur competition, and support growth through increasing access to financing (a key goal of Phase II). In addition to tackling the outstanding elements of Phase I and remaining 2007 FSAP update recommendations, the reform agenda should focus on a forward-looking approach to assessing the evolution and scope of potential risks. In this regard, implementation of a comprehensive Basel II framework is underway, along with prudential measures designed to limit excessive risk build up within the financial sector. Staff considers that other priorities should include:

  • reducing banking sector concentration through further privatization or significant balance sheet reduction of state owned banks, with the goal of enhanced competition;

  • increasing the detail, quality and frequency of publication of aggregate performance and soundness indicators, and encouraging additional transparency banks’ reporting of key indicators (e.g., level and composition of Tier 1 capital/risk weighted assets, non-performing assets ratios);

  • increased and systematic coordination, and consistent risk methodologies, between the CBE (bank supervision) and the new (nonbank) Egyptian Financial Supervisory Authority; and

  • removing the remaining structural impediments to enhanced financial intermediation, while developing safeguards to limit potential new risks (e.g., divergent risk assessments amongst banks, emerging derivative-like structured products (particularly related to PPP financing)).

Table 1.

Egypt: Selected Macroeconomic Indicators, 2005/06–2010/11 1/

(Quota: SDR 943.7 million)

(Population: 75.2 million; 2007/08)

(Per capita GDP: US$2,162; 2007/08)

(Poverty rate: 18.4 percent, 2005)

(Main products and exports: hydrocarbon products, cotton/textiles, iron and steel products, tourism; 2007/08)

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Sources: Egyptian authorities; World Bank (poverty rate); and Fund staff estimates and projections.

Fiscal year ends June 30.

Staff estimates based on revised data and new budget classification adopted in 2006.

Series break in 2005/06, when fuel subsidies were explicitly recorded, and matched by an equivalent notional revenue (from the oil company (EGPC) and its foreign partners) line item.

Includes acquisition of financial assets.

Table 2.

Egypt: Summary of Budget Sector Fiscal Operations, 2005/06–2010/11 1/

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Sources: Ministry of Finance; and Fund staff estimates.

Staff projections. Budget sector comprises central government, local governments, and some public corporations. The fiscal year begins on July 1st. The data are presented on a cash basis consistent with the GFS 2001 classification.

Beginning in 2005/06, the cost of domestic fuel subsidies and the notional revenues from EGPC are recorded on-budget.

Table 3.

Egypt: General Government Fiscal Operations, 2005/06–2010/11 1/

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Sources: Ministry of Finance; and Fund staff estimates.

Staff projections. General government includes the budget sector, the national investment bank (NIB) and social insurance funds. The fiscal year begins on July 1st. The data are presented on a cash basis consistent with the GFS 2001 classification. The 2009/10 projections based on the budget for the central government.

Beginning in 2005/06, the cost of domestic fuel subsidies covered by EGPC are recorded on-budget and notional revenues from EGPC are also recorded on-budget.

Table 4.

Egypt: Monetary Survey, 2005/06–2010/11

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Sources: Central Bank of Egypt; and Fund staff estimates and projections.

Payments (on original schedule) of public enterprises on debt rescheduled by the Paris Club.

Includes foreign currency deposits of commercial banks at the CBE.

Table 5.

Egypt: Balance of Payments, 2005/06–2010/11

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Sources: Central Bank of Egypt; Fund staff estimates and projections.

Repatriation of oil company profits is classified as income payments as opposed to oil imports starting in 2009/10.

Includes multilateral and bilateral public sector borrowing and private borrowing.

As of 2007/2008, it includes net foreigners’ transactions in LE government bonds floated abroad and their net transactions on Egyptian TBs and CDs.

Counting additional SDR allocation by US$ 1.2 billion in August 2009.