The Governor of the Central Bank of Egypt (CBE) Farouq Al-Okda said there is no intention to reduce the price of the pound, adding that what was said by some exporters in this regard is not relevant. At a press conference yesterday, he said rules for banks to lend to companies would not be changed, mocking those who call for using the cash reserves in financing projects. He added that cash reserve has two tasks only, namely protecting the stability of the national currency and bridging the deficit in the balance of payments.
For the first time, the governor used figures to illustrate the effects of the global financial crisis on the economic transactions between Egypt and the outside world (balance of payments). He confirmed that the balance of payment's overall surplus retreated during the first quarter of this fiscal year to some $0.5 billion against $1.2 billion during the same period last year.
Foreign direct investments dropped by 44% in July-September 2008 compared to the same period last year. In addition, there was a fall of more than $2 billion in indirect investments (portfolio), which account for 90% of the treasury bonds, Al-Okda said.
In an attempt to encourage banks to finance projects, the CBE Board of Directors issued a decree exempting banks which grant loans and credit facilitations to companies and small and medium-sized enterprises from the reserve ratio (14%).
Al-Okda added that the CBE's sector in charge of controlling and supervising banks would later issue decisions, procedures and rules relating to the application of the exemption. There would be coordination with concerned bodies to set policies aimed at rehabilitating companies and SMEs to obtain finance and banking services in a way that does not contravene the rules of finance.
