The Central Bank excelled in employing monetary policy mechanisms

20/12/2021





Ashraf El Kady: president of The United Bank
The Central Bank excelled in employing monetary policy mechanisms to curb inflation and maximize the returns of sustainable development.

•    The Central Bank's proactive monetary policy has supported the growth of the national economy.
•    The most prominent Egyptian economic reform program in the Middle East with an international certificate.
•    Management of return rate mechanisms pushed inflation indicators down.
•    The success of economic reform programs is an evidence of the harmony of monetary and fiscal policy and the strategy of the Egyptian state.
•    High economic growth rates during the year 2021-2022.
•    Changing the investment map of the banking sector.
•    8 axes of The Central Bank initiatives to support the strong national economy.
•    A parallel track to achieve social justice and support the neediest groups.

Cairo: December 5th, 2021

Ashraf El Kady, president of The United Bank, stated that the monetary policy of The Central Bank of Egypt was proactive and contributed to controlling inflation rates, according to the report of The Central Bank of Egypt, compared to global rates, especially with the impact of the economies of many countries of the world with the corona pandemic and that day at the Conference of CEOs in its seventh session, under the title of how the Egyptian economy escapes the trap of global recession.

In the second session, discussions revolved around the role of The Central Bank of Egypt's initiatives in increasing the capacity of the Egyptian economy to face the global inflation crisis. The session was moderated by Reham Desouky - Head of Strategy Sector, Egypt's Sovereign Fund for Investment and Development, with the participation of Ashraf El Kady - president of The United Bank, Mohamed Ali - Managing Director and CEO of Abou Dhabi Islamic Bank, Sherif Samy - Chairman of the Commercial International Bank, and Mohamed Abbas Fayed - CEO of First Abou Dhabi Bank.

During his speech, Ashraf El Kady expressed that the Egyptian state's implementation of the structural economic reform program is the most prominent in the Middle East through the liberalization of the exchange rate, the application of value-added tax and the restructuring of the energy and electricity subsidy system which contributed in supporting the general trend of the Egyptian state towards investment expansion and reducing the cost of financing for banks, in addition to reducing the internal government borrowing rates and thus reduce the deficit in the general budget of the state which was reflected in the increase in the movement of money, whether savings or deposits within the banking system, activating the market and increasing consumer spending. Consequently, the demand for granting finances increased, especially for the large companies sector and the small, medium and micro enterprises sector.

El Kady praised The Central Bank's ingenuity in using the rate of return mechanism to control inflation and the high level of goods and services where the Monetary Policy Committee of The Central Bank, in its last meeting, kept the interest rates unchanged, whether for deposit or lending. This has contributed in attracting money and savings through savings vessels of various kinds, whether traditional or Shariaa-compliant which was reflected in the reduction of the amount of cash circulating in the market and the use of cash in general. Thus, it reduced the demand for goods and services, which leads to lower prices, i.e. lowering inflation rates, in addition to reducing the cost of government borrowing from banks through various debt instruments, such as treasury bills and bonds.

The success of economic reform programs is an evidence of the harmony of monetary and fiscal policy and the strategy of the Egyptian state
El Kady made it clear that the economic reform programs are proceeding according to the plans set for them, despite the great challenge of the corona virus and its repercussions on the global economy. However, The Central Bank, with its wise policies, absorbed the shocks and recorded a journey of rising economic growth rates and an improvement in the investment climate, with testimonies from major international institutions, to record high growth rates during 2021-2022, which confirms the recovery of the Egyptian economy from the effects of the pandemic.

Changing the investment map of the banking sector by pumping more investments into the technological infrastructure, cyber security and national social projects.
The president of The United Bank continued his speech that there are many local and global indicators that indicate the growth of the digital transactions market and electronic commerce, especially after the outbreak of the corona virus crisis. This prompted the decision makers in the great countries to place defense and cyber security issues at the top of their national and defense policies.

In Egypt, there was a strong need to speed up the process of rehabilitating the infrastructure of banks by pumping more investments in the field of information technology, data protection and cyber security in general, as well as the steps of the Egyptian state and The Central towards maximizing economic activity in its various fields in general, whether industrial, agricultural, service or commercial, especially in the field of national social projects such as "A Decent Life". This requires innovative financing tools that are suitable for different groups of society.
 
8 axes of The Central Bank initiatives to support the strong national economy
 
First: Economic Initiatives:

1.    Small, Medium and Micro Projects Initiative.
By setting a stimulus policy and mandatory measures to implement the small, medium and micro projects financing initiative under the auspices of the President of the Republic as well as unifying the concepts and definitions of this promising sector which contributes to encouraging investors in various economic activities, such as the industrial sector, the tourism sector, and the contracting sector. It was the latest series of the National Central Bank’s initiative in the agricultural sector to support farmers and encourage investors to expand agricultural activities, which contributes to increasing production, increasing the area of agricultural land, achieving self-sufficiency in the medium term, as well as maximizing Egyptian exports.

2.    The initiative to eliminate bad debts.
 The banking sector, led by the Central Bank of Egypt, had a major role in addressing the repercussions of the corona virus crisis and remedying its effects so that it would not affect in the future the performance of economic reform programs and the Egyptian state’s plans for comprehensive and sustainable growth.

There were many measures on the economic and social side and the national initiatives adopted by The Central Bank of Egypt, which gave these exceptional policies of the World Bank and international financial institutions a new certificate of confidence that the Egyptian state is serious about completing the process of economic reform. This contributed to accelerating the process of grants for additional financing to Egypt to enable it to maintain the gains of economic development programs.

3.    Digital transformation and financial inclusion initiatives.
Put Egypt on the right path towards the transformation of the digital society. This is evident from the work of the Supreme Council of Payments, which is chaired by the President of the Republic himself as well as upgrading the financial system and developing technological infrastructure as well as the issuance of a special law to develop non-cash financial transactions, in addition to the automation of government services. These measures will lead to the reduction in the use of banknotes outside the banking sector and a shift to a cashless society. The entry of new segments into the banking sector, led by women and youth as well as encouraging the use of electronic channels and working to achieve financial inclusion and the integration of the parallel economy with the formal as well as increasing tax receipts.

4.    The Central Bank of Egypt's national strategy for cyber security.
Ashraf El Kady praised the pro-activeness of The Central Bank of Egypt in developing a national strategy for cyber security and the foundations for addressing fraud, especially in light of the increase in digital transactions and the expansion of the base of financial inclusion. The United Bank has started its implementation.

This strategy was based on three main axes: strengthening cyber security, cyber governance and cyber security and building national capacities.

In addition to a series of proactive steps that enhance cybersecurity applications in banks and banking institutions and strengthen their capabilities to address electronic attacks, including:

•    Establishing a cyber security sector whose mission is to predict cyber-attacks before they occur and inform banks and financial institutions. This enhances the ability of these institutions to confront threats, especially with the expansion of digital uses, financial inclusion and digital transformation.

•    Issuing the new Central Bank Law 2020, which works to establish and achieve the rules of governance in the management of banks, and then banking stability and enabling the economy to achieve sustainable development.

•    Re-drafting the general framework and strategic reference for cybersecurity which contributes in developing a working methodology and finding a common language for managing security risks and evaluating them periodically to confront these crimes.

5.    The Initiative for the Care and Development of Young Egyptian Minds.
The culture of entrepreneurship is the way to grow the economies of countries in general and Egypt in particular, giving power to entrepreneurs, providing them with the necessary skills, and creating a work environment that supports and supports their success which will bring the whole Egyptian state well in its path towards sustainable development and Vision 2030.

•    In the field of FinTech - The Central Bank continues to support emerging companies and innovative ideas for Egyptians, especially young people, through the Nile Pioneers initiative in cooperation with Nile University.

Second: Social Initiatives Axis:

Ashraf El Kady notes that the Egyptian citizen is a strategic partner in the economic reform process and is the driving force of the state's development plans. He is the one who bears the repair bill and the rise in prices and services. Therefore, it is important for the citizen to realize the dimensions of the term foreign exchange reserve increase and the repercussions of this rise on the improvement in his daily and future livelihood.

By creating a system of harmony between the Central Bank of Egypt and the government with the support of the political leadership and the trust of the citizen, the Central Bank of Egypt launched many social initiatives over the past 6 years aiming to improve the life of the citizen, including:

1.    The initiative to convert cars to operate with natural gas "Go Green".  Under the auspices of the President of the Republic and in coordination of the Ministry of Trade and Industry, the Central Bank of Egypt and a number of relevant ministries.

The Central Bank of Egypt has allocated 15 billion Egyptian pounds for this initiative, which aims to maximize the Egyptian citizen's benefit from the gains of economic reform through:

•    Maximizing the use of natural gas as an alternative fuel to diesel and gasoline which achieves great economic and material savings in the general budget of the Egyptian state. It contributes to directing this savings to support the health, education and scientific research sectors to advance the system of services provided to the Egyptian citizen and improve his life.

•    Elimination of pollution and harmful environmental emissions that affect the health of citizens and the surrounding environment from the effects of the use of fuels.

•    Achieving the maximum benefit from the production capacities of the Egyptian car factories and the industries feeding them. This contributes to maximizing production, increasing the local component, and increasing employment rates, thus eliminating unemployment and increasing exports.

2.    The Real Estate Finance Initiative.
The presidential initiative for real estate finance and the decisions of the Central Bank of Egypt brought about a quantum leap in the real estate market, unprecedented globally, and a leap in the real estate investment sector in Egypt due to the competitive rate of return. The initiative witnessed a large demand from the category of low and middle incomes to purchase housing units in the various governorates of the Republic. Also, it contributed to the process of urban expansion and the creation of new urban communities at the level of 14 governorates of the Republic.

3.    The Women's Economic Empowerment Initiative.
By maximizing their leadership and strategic role within the banking sector and economic activities in general and that through the allocation of two seats on the boards of directors of banks.