01:08 PM
Wednesday 01 March 2023
I wrote – Manal Al-Masry:
The Central Bank of Egypt turned to profits last December, recording profits of more than one billion pounds at the end of December 2022, for the first time in more than 5 years, specifically since 2017-2018, according to data published on its website.
The central bank’s achievement of net profits in December 2022 came after it stopped supporting 5 low-interest initiatives and announcing the transfer of support for initiatives before the end of last November to several government agencies with the aim of relieving pressure on the central bank’s profitability, as well as more transparency in the cost of support in the state’s general budget.
The total losses of the Central Bank in its financial position at the end of last November amounted to about 114.2 billion pounds, according to Central Bank data.
The central bank’s losses began since banks increased financing subsidized initiatives with the aim of supporting the private sector and youth, as well as supporting inflation through high-yield certificates to absorb liquidity, considering interest as one of the central tools to curb inflation.
Gamal Negm, Deputy Governor of the Central Bank, said earlier in 2020 to Masrawy that the initiatives launched by the Central Bank with subsidized interest are one of the reasons why the Central Bank incurred losses in its last budget.
But the cost of the monetary policy pursued by the Central Bank in order to achieve price stability in the market by collecting the money supply in the market to curb inflation, causes the bulk of these losses, according to Gamal Najm.
The Prime Minister had issued a decision – published in the Official Gazette last November 20 – to transfer support for 5 low-interest initiatives from the Central Bank of Egypt to 3 government agencies, which are the Ministries of Finance, the Ministries of Housing, Utilities and Urban Communities, and the Tourism and Antiquities Support Fund (or the Ministry of Tourism and Antiquities), This is one of the International Monetary Fund’s demands to reduce the burden on the Central Bank’s budget.
This decision means, according to what was published in the Official Gazette, that the Central Bank stopped bearing the cost of supporting 5 initiatives, which are the two real estate financing initiatives with an annual interest rate of 8% on a decreasing basis for middle-income people, and 3% for the middle and low-income segment, the tourism initiative with an interest of 11%, and the replacement initiative. Dual-fuel vehicles (fuel and gas) at 3% interest, and the initiative to encourage irrigation using modern means at 0% interest.
And the value of bank financing in two initiatives (the industry, agriculture and contracting initiative, and the real estate financing initiative for low-income people) exceeded more than 500 billion pounds in the last 5 years, including 345 billion pounds in the industry initiative in 3 years, which explains the size of the interest cost burden on the Central Bank to activate the private sector. .
