The annual growth rate of lending to the private sector continued its precipitous decline at the end of June 2011, reaching only 0.8 percent, or 422.5 billion EGP (U.S. $70.7 billion), according to a recent report released by the Egyptian Ministry of Finance. The growth rate in May 2011 was 2.7 percent and 7.7 percent at the end of June 2010. The Ministry does not intend to issue international bonds at the moment, despite the 134 billion EGP (U.S. $22.4 billion) gap in the budget, said Deputy Egyptian Prime Minister and Minister of Finance Hazem Beblawi. The local market will be used to meet these financial needs, he reported. “The Egyptian government should not increase its reliance on banks to manage its needs,” said Adel Muhsin, the vice president of the Egyptian Society for the Study of Funding and Investment. “A higher volume of bonds and treasury bills put pressure on the liquidity of the banking system and affects lending to the private sector.” “Excessive borrowing from the banking sector will put pressure on banks' ability to fund special projects in different segments and generate employment opportunities,” Muhsin continued. He added that this approach will also affect the liquidity available at banks and will force them to raise the interest paid on customer deposits to 11 percent for the first time in many years. “The government should expand partnership projects between the public and private sectors, particularly with regard to infrastructure, in order to ease the pressure on public spending,” Muhsin said.
