EconomicReview 2006 2007-Vol 3 Eng

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CENTRAL BANK OF EGYPT

ECONOMIC REVIEW

Vol. 47 No. 3

2006/2007

Research, Development and Publishing Sector


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This Review, issued in Arabic and English by the Research,Development and Publishing Sector, focuses on economic developments inARE and in the world and presents specialized studies of relevance. Opinionsexpressed do not necessarily reflect those of the Bank.


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Major Monetary and Financial Indicators

July/March

2005/2006 2006/2007

GDP (LE bn)

GDP in Market Prices 454.2 520.2

Annual Growth Rate (%) 12.9 14.5GDP at Factor Cost 321.0 343.2Annual Growth Rate (%) 6.7 6.9

GDP by Sector at Factor Cost (%)

A) Productive Sectors 5.2 6.3Of which:Construction and Building 12.7 15.5Manufacturing (Oil Refining & Others) 6.2 6.9Extractions (Oil, Gas & Others) 19.2 5.0Agriculture, Irrigation and Fishing 3.0 3.4

B) Service Sectors 6.3 7.6Of which:Suez Canal 8.9 16.0Communications 9.5 13.8Wholesale and Retail Trade 7.4 8.5Financial Intermediaries & Supporting Services 5.1 6.9

Price Index

- Change in Consumer Price Index (urban)(99/2000 = 100) 2.8 8.1

- Change in Wholesale Price Index (99/2000 =100) 0.4 9.8


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July/March2005/2006 2006/2007Monetary Survey (LE bn)

End of period

Domestic liquidity (M2) 534.7 610.5Growth rate (%) 8.3 8.9

Reserve money 112.2 126.5Growth rate (%) 11.0 9.0

Money supply (M1) 103.3 123.6Growth rate (%) 15.2 13.1

Currency in circulation / Money Supply (%) 68.0 67.4Banking System Foreign Assets, of which 215.9 283.3CBE Foreign Assets 127.0 147.4

Banking System Foreign Liabilities, of which 84.3 84.2CBE Foreign Liabilities 66.1 64.8

Total Deposits with Banks (excl. CBE ) 552.3 594.1In Local Currency 393.4 417.0In Foreign Currencies 158.9 177.1

Foreign Currency Deposits/Total Deposits (%) 28.8 29.8Total Lending and Discount Balances Extended byBanks (excl. CBE ), of which: 315.2 342.5

To Government and Public Economic Authorities 21.1 25.3To Business Sector (Public and Private) 241.5 256.1

Portfolio of Securities and TBs with banks (excl.CBE), of which: 196.4 180.9

TBs and Government securities 123.2 108.4Loans/Deposits with Banks (%) 57.1 57.7Investment in Securities, TBs and EquityParticipation/ Deposits (%) 35.6 30.5

July/March2005/2006 2006/2007Annual Discount and Interest Rates (%)

End of Period

CBE lending and discount rate 9.00 9.00CBE Overnight Deposit and Lending Rates

Deposit 8.25 8.75Lending 10.25 10.75

Interest rate on 3-month deposits 6.2 6.2Interest rate on one year or less loans 12.6 12.7Average interest rate on 91 day TBs 8.4 8.3


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Domestic Public DebtEnd of

June 2006End of

March 2007- Government Domestic debt 387.7 468.3- Public Economic Authorities Debt 47.4 46.3- NIB Debt 158.4 104.9

US$ bn

July/MarchBalance of Payments

2005/2006 2006/2007

Balance of Current Account & Transfers1.9 3.3

Trade balance (8.2) (10.4)Merchandise exports 13.5 15.9

Oil and its products % 55.3 46.1Others % 44.7 53.9

Merchandise Imports (21.7) (26.3)Intermediate Goods % 27.9 27.0Investment Goods % 25.0 25.1Consumer Goods % 11.7 13.5Fuel, Raw Materials and Others % 35.4 34.4

Services Balance 6.0 8.7Receipts 12.9 15.1

Of which:Transportation % 28.2 31.0Travel % 43.2 41.0Investment income % 10.9 14.6

Payments (6.9) (6.4)Of which:

Transportation % 12.1 14.0Travel % 17.2 21.7

Investment income % 16.0 20.7Transfers 4.1 5.0

Official % 10.5 13.0Private % 89.5 87.0

Capital and Financial Account 1.8 (0.2)Overall Surplus (Deficit) 3.3 3.1

Outstanding External Debt at End of March 28.9 28.7


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Domestic Developments


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2007) to absorb the excess liquidity at the banking system. A large part of thisexcess came from the substantial increase in foreign exchange inflows during the

period.

Domestic liquidity amounted to LE 610.5 billion at end of March 2007, up by LE 50.1 billion or 8.9 percent during the period. This was an outcome of theexpansionary effect of net foreign assets and domestic credit. The former augmented by the equivalent of LE 65.7 billion; and the latter rose by LE 13.0

billion. Other items (net) declined by LE 28.6 billion.As for credit and banking developments , banks' aggregate financial

position reached LE 879.6 billion at end of March 2007, with a rise of 15.5 percentduring the period against 11.1 percent during the corresponding period. Likewise,deposits increased by LE 25.3 billion or 4.4 percent during the period, to postLE 594.1 billion at end of March 2007. LE deposits constituted two thirds of totaldeposits, which reflected higher propensity for local currency, given the stabilityand appreciation of the Egyptian pound. Banks' balances of lending and discount(excluding the Central Bank) increased by LE 18.5 billion or 5.7 percent, to reachLE 342.5 billion. Over three fourths of this increase were in foreign currencylending and discount balances, which rose by the equivalent of LE 14 billion. Themajor recipient of credit facilities was the private sector (business and householdsectors), accounting roughly for 73 percent of the total. This signified theincreasing investments of this sector and the mounting importance of its role indevelopment, especially within the context of the efforts made to create a favorableinvestment climate.

The ongoing economic and banking reforms led to the stability of theforeign exchange market , as they strengthened foreign investors' confidence inthe Egyptian economy. Consequently, foreign investment stepped up, leading tomore foreign currency inflows into Egypt. During the statement period, forexmarket transactions remarkably improved as compared with the period of comparison. As such, market resources grew by US$ 9.7 billion, reaching US$32.5 billion, exceeding the rise of US$ 6.3 billion in utilizations that totaled US$24.4 billion. Thus, market transactions unfolded a surplus of US$ 8.1 billion duringthe period under review (against US$ 4.8 billion). In addition, the Egyptian pound


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appreciated vis--vis the US dollar by 1.08 percent during the period, as theaverage US dollar exchange rate (buy) dropped to LE 5.6925 at end of March2007, from LE 5.7523 at end of June 2006. Net international reserves rose by US$3.4 billion during the period to US$ 26.3 billion at end of March 2007, and further to US$ 29.6 billion at end of June 2007 (during the printing of this Review).

The stock market performance revealed that market capital rose by 21.9 percent, to reach LE 547.9 billion or 75.1 percent of GDP in March 2007. Themost active sector was the finance, insurance and real estate. The ratio of itsmarket capital to total market capital rose from 26.7 percent to 31.2 percent.

Foreigners' transactions on the Egyptian stock market (in both LE and USdollar) were active during the statement period. Foreigners' net purchases reachedLE 20.3 billion, against LE 3.4 billion, denoting a larger increase in the value of their purchases (LE 59.0 billion) than their sales (LE 38.7 billion), compared withLE 56.3 billion and LE 52.8 billion, respectively.

As for the execution of the consolidated fiscal operations of the state

budget sector (the administrative system, local administration and serviceauthorities), total revenues reached some LE 105.3 billion and total expendituressome LE 127.8 billion. This gave rise to a cash deficit of about LE 22.5 billion,and when adding the net acquisition of financial assets (about LE 6.5 billion), theoverall deficit will reach some LE 29.0 billion or 4 percent of GDP during the

period under review. Around 93.0 percent was financed by subscriptions of individuals and corporations for treasury bills and bonds (LE 22.7 billion); loansfrom insurance funds (LE 4.1 billion) and NIB (LE 0.2 billion); and privatization

proceeds of LE 0.1 billion during the period. The remaining deficit was financed by the government, helped by activating the Treasury Single Account (TSA)system at the Central Bank (around LE 15.7 billion), alongside other sundryfinancing sources. Eventually, domestic and foreign repayments totaled LE 21.9

billion during the period under review.

Against this backdrop, gross domestic public debt rose by about LE 26.0 billion during July/March 2006-2007, to reach LE 619.5 billion at end of March2007. Of this amount, government debt represented 75.6 percent or 64.2 percent of GDP.


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Concerning external transactions , the BOP realized an overall surplus of US$ 3.1 billion during July/March 2006/2007 (against US$ 3.3 billion during the

period of comparison). This was an outcome of the US$ 3.3 billion surplus on thecurrent account, resulting from the higher surplus on services and the rise in netunrequited transfers, on the one hand; and the widening of the trade deficit, on theother. The trade deficit of US$ 10.4 billion (a rise of 25.7 percent) was attributed tothe increase of 21.0 percent in merchandise imports, to US$ 26.3 billion, becauseof the rise in non-oil imports by 30.3 percent and the decline in oil imports by 23.7

percent. Meanwhile, merchandise exports rose by 18.1 percent, recording US$ 15.9 billion, as a result of the surge in non-oil export proceeds by 42.4 percent and thedecline in oil exports by 1.5 percent. Services surplus scaled up by 43.5 percent,driven by a rise of 17.1 percent in invisible receipts. This was ascribed to theincrease in travel receipts (with a climb of 11.1 percent in the number of touristnights). Transport receipts and investment income also increased. Likewise, netunrequited transfers went up by 21.5 percent, due to the rise in private transfers,mainly the remittances of Egyptians working abroad. As to the capital andfinancial account, net outflows of US$ 247.4 million were realized (against netinflows of US$ 1.8 billion during the period of comparison). The doubling of FDIin Egypt was essentially behind this increase, as it unfolded net inflows of over US$ 9.0 billion during the reporting period.

Regarding international finance, resource inflows rose by US$ 1.8 billion,standing at US$ 9.6 billion during July-March 2006-2007. This was mainly due tothe increase in net FDI in Egypt.

The balance of external debt denominated in US$ (mostly owed by the public sector) amounted to US$ 28.7 billion at end of March 2007, with a retreat of US$ 0.9 billion, compared with the end of June 2006. This decrease was attributedto the net repayment of loans and facilities of about US$ 1.5 billion, on one hand,and the appreciation of the exchange rates of most currencies of borrowing by US$

0.6 billion, on the other.Due to the US$ 625.9 million decrease in external debt service (principal

and interest payments), its ratio to current receipts (including private and officialtransfers in the BOP current account) improved to 5.5 percent during the periodunder review, against 8.5% during the period of comparison. Likewise, the ratio of debt service to total export proceeds of goods and services dropped from 9.9

percent to 6.4 percent, owing to higher exports of goods & services, as well astransfers, by about 18.1 percent.


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1- Development and Growth

1/1: Gross Domestic Product

Egypt's economic performance continued to improve during July/March2006/2007. Real GDP at market price grew, according to the Ministry of State for Economic Development, by 6.9 percent to LE 365.5 billion during the periodunder review, against 6.5 percent and LE 342.0 billion during the period of comparison. GDP at factor cost and constant prices amounted to LE 343.2 billionat a growth rate of 6.9 percent against 6.7 percent during July/March 2005/2006.

GDP Growth rate at Factor cost (Constant Prices)July/March

0

1

2

3

4

5

6

7

8

2002/2003 2003/2004 2004/2005 2005/2006 2006/2007

%

The productive sectors contributed 3.1 percentage points to real GDP atfactor cost (6.9 percent). The manufacturing sector was the main contributor (1.3 percentage points), followed by construction and building (0.7 percentage point).As for the services sectors, they shared with 3.8 percentage points in the GDP (of which, the sectors of wholesale trade and the Suez Canal posted 1.1 and 0.5

percentage points).


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Share of Production and Services Sectors in Real GDP at Factor Cost,July/March 2006/2007

(%)2005/06 2006/07GrowthRate

GrowthRate

RelativeWeight

Contribution Rati(percentage point)

GDP 6.7 6.9 100

:Productive sectors, of which 5.2 6.3 49.5 3.1Agriculture, irrigation and fishing 3.0 3.4 15.2 0.5Extractions (oil, natural gas andothers) 19.2 5.1 8.5 0.4Manufacturing (oil refining andothers) 6.2 6.9 18.6 1.3Construction and building 12.7 15.5 5.0 0.8

:Services sectors, of which 6.3 7.6 50.5 3.8Wholesale and retail trade 7.4 8.5 12.3 1.0Financial intermediaries andsupporting services 5.1 6.9 5.5 0.4Transportation and storage 6.9 7.8 5.0 0.4Suez Canal 8.9 16.0 3.6 0.6Restaurants and hotels 3.8 12.9 3.5 0.4Communications 9.5 13.8 2.4 0.3Source: Ministry of State for Economic Development

As the private sector continued to broaden its role in the development

process, real GDP growth rate of this sector remained on the rise, reaching 7.2 percent during July/March of FY 2006/2007 (against 5.8 percent in the same period a year earlier). The private sector accounted for about 4.9 percentage pointsof the real GDP growth during the period under review, mostly generated by thesectors of manufacturing; wholesale and retail trade; construction and building;and agriculture, irrigation and fishing.


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Real GDP Growth Rates of Public and Private SectorsJuly/ March 2006/2007

(%)2005/2006 2006/2007

Growth Rate Growth RatePublic Private Public Private

GDP 8.6 5.8 6.3 7.2:Productive Sectors, of which 5.6 4.0 5.3 6.5

Agriculture, irrigation and fishing 3.3 3.0 5.3 3.4Extractions (oil, natural gas and others) 19.6 17.1 5.0 5.6Manufacturing (oil refining and others) 8.4 5.8 5.4 7.1Construction and building 12.4 12.8 10.2 16.2

:Services Sectors, of which 6.7 8.2 7.0 7.9Wholesale and retail trade 5.3 7.5 7.0 8.6Financial intermediaries and supportingservices 6.1 3.4 7.0 6.6Transportation and storage 6.5 7.0 7.1 7.9Suez Canal 8.9 0.0 16.0 0.0Source: Ministry of State for Economic Development

Grow th rate of Private sectors output,bysector (percentage point)Jjuly/March2006/2007

Wholesale & Retail

Trade

Construction &

Building,1.0

Others; 3.0

Manufactur ing

Industries,1.7

Grow th rate of public sectors output,by sector (percentage point) July/March 2006/2007

Others,2.6

SuezCanal 1.6

Extractions,

1.1General

Government 1.0


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1/2: GDP by Expenditure

The better economic performance during the statement period was supported by a rise in domestic and external demand. Concerning domestic demand, the private consumption continued to grow at a high rate of 10.5 percent during the period under review (against 12.6 percent), reaching LE 368.2 billion, andrepresenting 70.8 percent of GDP. Total investments also increased by 37.4

percent (against 21.5 percent), standing at LE 107.2 billion or 20.6 percent of GDP. This increase (about 80 percent) was concentrated in private investmentswhich surged by 48.4 percent (against 27.9 percent), reaching LE 71.4 billion or 66.6 percent of total implemented investments. This lifted up the private sectorsshare in GDP to 67.3 percent. The rise in the investments of this sector wasaccompanied with larger credit to the private business sector.

GDP by ExpenditureDuring July/March

(Current prices )Value

)LE bn(Growth Rate

(%)

2005/2006 2006/2007 2005/2006 2006/2007)6-2+5(GDP at Market Prices-1 454.2 520.2 12.9 14.5

)3+4(Gross Domestic Expenditure-2 467.8 537.8 13.7 15.0Final Consumption-3 389.8 430.6 12.2 10.5

- Public 56.5 62.4 9.9 10.4- Private 333.0 368.2 12.6 10.5Gross Capital Formation-4 78.0 107.2 21.5 37.4- Public 29.9 35.8 12.4 19.7- Private 48.1 71.4 27.9 48.4

ervicesSoods andGExports of -5 139.0 163.7 12.3 17.8ervicesSoods andGImports of -6 152.6 181.3 14.7 18.8

)3-1(Gross Domestic Savings-7 64.4 89.6 17.1 39.1)4-7(=)6-5(Domestic Resources Gap-8 )13.6( )17.6(

Source: Ministry of State for Economic Development


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The stronger economic performance was also spurred by a growth of 17.8 percent in exports of goods and services during the period (against 12.3 percentduring the period of comparison), reaching LE 163.7 billion. Despite the higher rate of increase in the exports of goods and services, it is still outpaced by that of imports of goods and services (18.8 percent, against 14.7 percent), thereby postingLE 181.3 billion. This in turn led to widening the domestic resources gap; albeit tolimited degree because of the mitigating effect of the higher growth rate of grossdomestic saving.

1/3: Inflation

According to CAPMAS, CPI- based inflation rate (urban) accelerated to 8.1 percent during July/March 2006/2007, against 2.8 percent during the same periodof the previous FY. The rise in inflation was attributed to the rapid economicgrowth, the second round effects of the avian flu supply shock and the oil subsidy

cuts of July 2006.The rise in prices was mainly pronounced in the group of foodstuffs and

beverages, primarily due to the price hikes in poultry and eggs under the influenceof the avian flu. Likewise, red meat prices went up because of the higher demandthereon, triggered by the avian flu, and the concomitant decline in supply due tothe foot and mouth and lumpy skin diseases. This upward trend was observed aswell in the prices of the two groups of housing, water, electricity and fuel; andtransportation, affected by subsidy cuts in some oil products.

--

/ / / / /

Domestic Resqurces Gap Exports Imports

Resources Gap


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Yet, the rise in inflation could have been larger, but for a number of factors.First, the LE exchange rate remained stable and increased vis--vis the US dollar and some other currencies during the period. Thus, the LE value increased by 1.1

percent versus the US dollar in the interbank market. Second, the Central Bank played a key role in sterilizing the effect of excess liquidity resulting from growingforeign currency inflows.

On monthly basis, inflation rates trended downwards during the last months

of the period, a matter that signified the phasing out of the price increases relatedto supply shocks. This has been one of the reasons that have prompted theMonetary Policy Committee (MPC) on March 22, 2007 to refrain from raising thekey interest rates, deciding rather to maintain the overnight deposit and lendingrates at 8.75 percent and 10.75 percent, respectively.

CPI-based Inflation Rates (Urban) during July/March 2006/2007(1999/2000=100)

(%)

March/JulyMain CPI Groups Weights2005/2006 2006/2007

exGeneral Ind 100.0 2.8 8.1Food and non-alcoholic beverages 38.9 4.2 9.0Clothing & footwear 10.4 0.1 4.5Housing, water, electricity & fuel 11.7 2.2 5.7Furnishings, household equipment &routine maintenance 4.9 3.6 4.8Health 4.6 3.9 2.9Transport 5.6 0.7 9.8Communications 2.0 -1.1 1.2Culture & recreation 5.9 1.8 19.5Education 5.7 4.6 11.1Hotels, cafes and restaurants 2.5 0.0 8.5Miscellaneous goods and services 5.0 0.8 11.3

Source: CAPMAS


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Relative Weights of Food (37.5%)Sugar,jam,honey,chocolate andconfectionery

1.8%

Other food products1.9%

Vegetables3.7%

Fruit3.1%

Oils and fats2.7%

Milk,cheese andeggs5.1%

Fish and seafood2.6%

Meat10.7%

Bread and cereals5.3%

Pulses0.6%

Hereunder are the main CPI groups that showed a rise in their price indices,according to their relative weights, rate of increase, and the spillover effects on thegoods and services of other groups:

Food and non-alcoholic beverages increased by 9.0 percent against 4.2 percent, as a result of the rise in the prices of the food group, especially:

- Meat: as a main result of the high prices of poultry due to weak supply, because of the avian flu. In addition, the foot and mouth and lumpy skindiseases reduced the supply of meat.

- Fish and seafood: mainly because of the increase in fresh fish prices as asecond round effect of the avian flu.

- Vegetables: primarily because of the higher prices of onion, potatoes andtomatoes. The rise of onion prices is attributed to seasonality. The higher

prices of potatoes and tomatoes are ascribed to larger volume of exports.The exports of potatoes increased to US$ 8.3 million during the period(against US$ 1.2 million), while those of tomatoes increased to US$ 1.9million (against US$ 0.3 million).


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- Fruits: as a main result of the surge in their exports to US$ 27.3 millionduring the period (up from US$ 17.9 million during the corresponding

period).

- Pulses: as a main result of the higher prices of beans and lentils.

Annual Inflation Rate of Food and Non-Alcoholic BeveragesRelative Weight (38.9%)

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Ju ly20 06 Au gus t Se p t. Oc t. No v. De c . Ja n .20 07 Fe b . Mar ch

Food&Non-alcoholic Beverages MeatFish and seafood Milk,cheese and eggs

%

- Housing, water, electricity & fuel increased by 5.7 percent (against 2.2 percent) mainly because of the higher prices of electricity, gas and fuel, up by 7.4 percent, following the reduction of energy subsidies.

- Transportation increased by 9.8 percent (against 0.7 percent) as a chief result of the rise in private transportation expenditure by 16.4 percent

(against 1.1 percent) and also transportation services by 6.9 percent (againstnil) under the impact of fuel price hikes.

- Culture & recreation increased by 19.5 percent (against 1.8 percent),mainly due to the higher prices of package holidays, up by 26.7 percent(against 2.4 percent); and newspapers, books, and stationery by 21.1 percentagainst nil.


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2- Monetary and Banking Developments2/1: Monetary and Banking Policy and Monetary Aggregates

During July/March 2006/2007, the CBE continued its pursuit to realise the

price stability objective of the monetary policy, through managing short-terminterest rates. The MPC decided (in its two meetings dated 2 Nov. and 14 Dec.2006) to raise the CBE overnight deposit and lending rates by 0.50 percent and0.25 percent, respectively, to 8.75 percent and 10.75 percent. The MPC's decision

aimed to contain the inflationary pressures ensuing from the acceleration of economic growth, the second round effects of avian flu supply shocks, and the oilsubsidy cuts.

The MPC decided in its subsequent periodical meetings to keep the key policy rates unchanged. The Committee's decision was taken in response to thestability of inflation (CPI-based) that ranged between 12.4 percent and 12.8 percentannually in January/March 2007. Moreover, the MPC noted that these rates havereached a peak and that the supply shock effects started to level off, a fact that was

proven by the deceleration in the annual inflation rates in April and May of 2007(during the printing time )

In order to absorb the excess liquidity at the banking system and to create afavorable environment for management of short-term interest rates, the CBEresorted to open market operations (OMOs). The outstanding balance of theseoperations amounted to LE 163.7 billion at end of March 2007 (outright salesregistered LE 75.1 billion, and accepted deposits LE 88.6 billion), against LE 93.7

billion at end of June 2006 (outright sales represented LE 37.3 billion, and

accepted deposits LE 56.4 billion).

The following graph shows the developments in the overnight interbank rates and the overnight deposit and lending rates from 2006 until April 2007.


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Overnight Interbank and Policy Rates

7.00

7.50

8.00

8.50

9.00

9.50

10.00

10.50

11.00

3 1 - J a n - 0

6

2 8 - F e b - 0

6

3 1 - M a r - 0

6

3 0 - A p r - 0

6

3 1 - M a y - 0

6

3 0 - J u n - 0

6

3 1 - J u l - 0

6

3 1 - A u g - 0

6

3 0 - S e p - 0

6

3 1 - O c t - 0

6

3 0 - N o v - 0

6

3 1 - D e c - 0

6

3 1 - J a n - 0

7

2 8 - F e b - 0

7

3 1 - M a r - 0

7

3 0 - A p r - 0

7

(%)

Overnight Interbank Deposit Facility Lending facility

2/1/1: Reserve Money

Reserve money rose by LE 10.4 billion or 9.0 percent during the reporting period, against LE 11.1 billion or 11.0 percent. The rise was an outcome of theincrease in both currency in circulation outside the CBE by LE 9.6 billion or 12.2

percent, and banks local currency deposits at the CBE by LE 0.8 billion or 2.2

percent.


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Reserve Money and Counterpart Assets

(LE mn)March/ange during JulyCh

2005/2006 2006/2007Balancesat End of

March2007 Value % Value %

Reserve Money-a 126474 11080 11.0 10424 9.0- Currency in circulation

outside the CBE 88195 7217 10.7 9591 12.2- Banks' deposits in localcurrency 38279 3863 11.4 833 2.2

AssetsCounterpart-b 126474 11080 11.0 10424 9.0Net Foreign Assets 82617 23565 63.2 21315 34.8Foreign Assets 147426 18259 16.8 17949 13.9

Gold 6429 - 0.0 - 0.0Foreign securities 97896 16429 98.6 49543 102.5Foreign currencies 43101 1830 2.1 (31594) (42.3)

Foreign Liabilities 64809 )5306( )7.4( )3366( )4.9(Net Domestic Assets 43857 )12485( )19.6( )10891( )19.9(Claims on the

)Net(Government 113437 )4298( )3.5( )618( )0.5(Claims, of which: 187580 (45886) (20.2) 15772 9.2Government securities 164761 (39616) (19.0) - 0.0Deposits 74143 (41588) (39.6) 16390 28.4

)Net(Claims on Banks 59651 27040 )123.0( 58633 5759.6Claims 77738 9413 81.3 60326 346.5Foreign currency deposits 18087 (17627) (52.5) 1693 10.3

sNet Balancing Item 129231- )35227( 96.5 )68906( 114.2Assets 46702 (492) (1.0) 4959 11.9Liabilities, of which: 175933 34735 40.6 73865 72.4

Equities 2544 0 0.0 31 1.2Provisions 49 (3) (1.0) (1) (2.0)


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Counterpart assets of reserve money augmented as an outcome of the rise innet foreign assets by the equivalent of LE 21.3 billion or 34.8 percent and thedecrease in net domestic assets by LE 10.9 billion or 19.9 percent. The pickup innet foreign assets at the CBE was a result of the growth in its foreign assets by theequivalent of LE 17.9 billion and a decline in its obligations by LE 3.4 billionworth. The increase in foreign assets was attributed to larger foreign currencyinflows to the CBE during the period.

The retreat in the CBEs net domestic assets was mainly ascribed to anincrease in the negative balance of other items (net) by LE 68.9 billion(unclassified assets and liabilities (net), capital accounts and OMOs). In addition,there was a decrease of LE 0.6 billion in the CBEs net claims on the government,

brought about by a rise in government claims thereto by LE 15.8 billion, andgovernment deposits therewith by LE 16.4 billion (following the transfer of theaccounts of the government entities and public economic and services authoritiesfrom banks to the Single Treasury Account [STA] at the CBE, by virtue of Law

No. 139 for 2006). On the other hand, the CBEs net claims on banks rose by LE58.6 billion as an outcome of the increase in its claims thereon by LE 60.3 billion(mostly in foreign currencies) and the rise in their foreign currency deposits at theCBE by LE 1.7 billion worth.

2/1/2: Banknote Issue

Banknote issue (including subsidiary coins) went up by LE 10.1 billion or 12.7 percent during July/March 2006/2007, against LE 7.4 billion and 11.0

percent, to reach LE 89.3 billion at end of March 2007. Consequently, the balanceof currency in circulation outside the CBE increased by LE 9.6 billion or 12.2

percent, reaching LE 88.2 billion at end of March 2007.


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Banknote Issue and Change Rates *(LE mn)

Annual Change Change duringMarch/JulyAt End of Balance of

Banknote IssueValue % Value %

June 2004 59922 7490 14.3March 2005 65376 8166 14.3 5454 9.1June 2005 67753 7831 13.1March 2006 75190 9814 15.0 7437 11.0June 2006 79253 11500 17.0March 2007 89341 14151 18.8 10088 12.7

* Including subsidiary coins issued by the Ministry of Finance

A breakdown of currency in circulation outside the CBE by denomination atend of March 2007, in comparison to end of June 2006 indicates that the relativeimportance of the LE 100 note rose to 50.3 percent against 44.9 percent.Meanwhile, the relative importance of most other denominations retreated. Thisreflected individuals preference for this large denomination as a reflection of thecontinued price increases.

Accordingly, the average value per note scaled up by 7.2 percent, reachingLE 23.58 at end of March 2007 against LE 22.00 at end of June 2006.


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Currency in Circulation outside the CBE*(LE mn)

2006June 2007March Change duringMarch/JulyDenominations

ValueRelative

Importance ValueRelative

Importance 2005/06 2006/07

Total 78604 100.0 88196 100.0 10.7 12.2Subsidiary currencies

)notes and coins( 236 0.3 256 0.3 2.7 8.5

Banknote in circulation 78368 99.7 87940 99.7 10.8 12.2PT 25 135 0.2 147 0.2 17.8 8.9PT 50 239 0.3 252 0.3 16.1 5.4LE 1 540 0.7 588 0.7 12.5 8.9LE 5 1095 1.4 1075 1.2 (6.0) (1.8)LE 10 4215 5.4 3640 4.1 (10.7) (13.6)LE 20 9128 11.6 8984 10.2 (9.4) (1.6)LE 50 27737 35.3 28897 32.7 11.0 4.2LE 100 35279 44.9 44357 50.3 23.6 25.7* Representing the difference between banknote issue and the cash at the CBE vaults

2/1/3: Payment Systems and Information Technology

In the contexts of the reforms undertaken in the payments system, tomitigate financial risks, as well as expedite financial transactions, and enhance thesystem reliability, the following steps were taken during the reporting period:

Concerning the real time gross settlement (RTGS) system which reduces

credit and settlement risks and facilitates banks management of liquidity,the CBE in cooperation with the European Commission, has concluded acontract with a leading international corporation specialized in this field,on supplying the above mentioned system. Currently, plans for the coming

period are being devised to initiate the actual implementation of thissystem during the second quarter of 2008.


28/168


29/168

- 21 -

In the area of information technology at the CBE and the banking sector,the following developments took place :

Completing the design of the CBEs new website. All information and datato be disseminated were collected from the Banks different departments.Following its experimental operational phase, the website is about to belaunched. The CBE is also following up the establishment of its new

branches in Tanta and Assiut.

Concerted efforts are being exerted, in coordination with the Ministry of Finance, to implement a project serving the settlement of governmentreceipts. Automation of these transactions is being finalized, so as to shortenthe settlement duration - for the Account of the Ministry of Finance (withinthe Treasury Single Account)- to two days, instead of one month under themanual system, at the banks representing the CBE in the governorates (five

banks). The operation of this system was initiated with the participation of three banks, while the other two banks were granted a deadline of one monthto complete the procedures of participation.

2/1/4: SWIFT Local Service and Clearing Houses Activity

Data on banking transfers under the Fin Copy-system, conducted through

the SWIFT system, showed an increase in the number of LE executed messages by84.3 thousand transfers during the period, reaching 377.6 thousand transfers. Thevalue of these transfers increased by LE 383.7 billion, to reach LE 1572.6 billion atend of March 2007.

The number of interbank dollar transactions, under the Fin Copy system,increased to 8354, at a value of US$ 47.0 billion during July/March 2006/2007,against 8164 transactions at a value of US$ 28.0 billion during the corresponding

period of the previous FY.


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- 22 -

SWIFT Local Service Activity(LE mn)

March/July2004/05 2005/06 2006/07

Change inDuring(1) (2) (3) (2)-(1) (3)-(2)

yIn Local Currenc:First

Number of messages (unit) 239899 293297 377598 53398 84301Value of executed transfers (LE mn) 939000 1188906 1572606 249906 383700

In US Dollar:Second

Number of messages (unit) 7949 8164 8354 215 190

Value of executed transfers (US$ mn)

31224 28044 47047 (3180) 19003

Concerning the Automated Clearing House activities, the number of

exchanged cheques increased to 7.7 million, at a value of LE 253.3 billion. Thisdrove up the average value per cheque to LE 33.0 thousand during July/March2006/2007, against LE 30.1 thousand during the corresponding period of the

previous FY..

CBE Clearing Houses Activity

Cheques ChangeDuring Number

(in thousand)Value

(LE mn)Number Value

July/March 2005/2006 6825 205561 (2.1) 6.0

July/March 2006/2007 7670 253253 12.4 23.2

2/1/5: Domestic Liquidity and Affecting Factors

Domestic liquidity (M2) totaled LE 610.5 billion at end of March 2007, up

by LE 50.1 billion or 8.9 percent during July/March 2006/2007, against LE 40.8 billion and 8.3 percent a year earlier. Such a rise was due to the pickup in moneysupply (M1) and quasi-money.


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Domestic Liquidity Structure(LE mn)

March/Change during July2007End of March 2005/2006 2006/2007

BalancesRelative

Importance Value % Value %

2M 610452 100.0 40779 8.3 50096 8.91M 123592 20.2 13637 15.2 14318 13.1

Money in circulation

outside the bankingsystem 83332 13.6 7229 11.5 9093 12.2Demand deposits in localcurrency 40260 6.6 6408 24.0 5225 14.9

Money-Quasi 486860 79.8 27142 6.7 83577 7.9Time and SavingDeposits in LocalCurrency 340622 55.8 20332 7.2 26434 8.4Foreign CurrencyDeposits 146238 24.0 6810 5.6 9344 6.8- Demand 22689 3.7 2907 16.0 4156 22.4

- Time and saving 123549 20.3 3903 3.8 5188 4.4

M1 rose by LE 14.3 billion or 13.1 percent, against LE 13.6 billion and 15.2 percent a year earlier, thereby reaching LE 123.6 billion, or 20.2 percent of totaldomestic liquidity at end of March 2007. This increase was ascribed to a rise of 12.2 percent in money in circulation outside the banking system and 14.9 percentin banks local currency demand deposits.

Quasi-money (local currency time & saving deposits and foreign currencydeposits) grew by LE 35.8 billion or 7.9 percent during the period under review,against LE 27.1 billion and 6.7 percent, posting LE 486.9 billion or 79.8 percent of total domestic liquidity at end of March 2007. Almost 51.0 percent of the rise wasin local currency deposits of the household sector, which went up by LE 18.2

billion or 6.7 percent to LE 291.3 billion or 60 percent of quasi-money. Thisreflects higher propensity to save in the Egyptian pound, given the stability of itsexchange rate.


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Domestic Liquidity (End of March)

0100200300400500600700

2004 2005 2006 2007Foreign currency depositsTime & saving deposits in local currencyDemand deposits in local currencyCurrency in circulation outside the banking system

LE bn

Foreign currency deposits augmented by LE 9.3 billion worth or 6.8 percent,to stand at LE 146.2 billion at end of March 2007. However, their relative

importance declined to 27.7 percent of total deposits, against 28.2 percent at end of June 2006. Such a rise was mainly in the deposits of the private business sector (53.2 percent), followed by the household sector's (41.7 percent).

Counterpart Assets of Domestic Liquidity(LE mn)

March/Change during July2007End of March 2005/2006 2006/2007

Balances RelativeImportance Value % Value %

Domestic Liquidityrpart AssetsCounte 610452 100.0 40779 8.3 50096 8.9

Net Foreign Assets 199039 32.6 50678 62.6 65654 49.2- The CBE 82617 13.5 23566 63.2 21316 34.8- Other banks 116422 19.1 27112 62.2 44338 61.5Domestic Credit 522526 85.6 23573 5.1 12994 2.6Government (net) 181583 29.7 11025 6.9 (2548) (1.4)Public business sector 23642 3.9 (2741) (7.3) (9247) (28.1)Private business sector 259277 42.5 6729 2.9 19939 8.3Household sector 58024 9.5 8560 20.7 4849 9.1

)Net(Other Items 111113- 18.2- )33472( 62.2 )28552( 34.6


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The expansionary effect on domestic liquidity during the period was primarily exercised by net foreign assets, as they recorded a higher rise thandomestic assets. However, this rise was curbed by the fall in net domestic assets,due to the pickup in the negative balance of net balancing items.

The relative distribution of CounterpartAssets of Domestic Liquidity

(End of Mar 2007)

67.4%

32.6%

Net Foreign Assets

Net Domestic Assets

The Relative Distribution of CounterpartAssets of Domestic Liquidity

(End of June 2006)

76.2%

23.8%

Net Foreign Assets

Net Domestic Assets

Net foreign assets surged by LE 65.7 billion worth to LE 199.0 billion atend of March 2007, due to the increase in net foreign assets of banks by LE 44.4

billion worth and the CBE by LE 21.3 billion worth. The increase was mainlyattributed to the surge in foreign currency inflows during the period.

Net Foreign Assets of the Banking System(LE mn)

Change in Net2006June 2007March March/uring JulyD

ForeignAssets

ForeignLiabilities Net

ForeignAssets

ForeignLiabilities Net 2005/06 2006/07

Total 218982 85597 133385 283279 84240 199039 50678 65654

CBE 129477 68176 61301 147426 64809 82617 23566 21316Other

banks 89505 17421 72084 135853 19431 116422 27112 44338

Net domestic assets fell by LE 15.6 billion or 3.6 percent during the period.Such a decline resulted from a rise in the negative balance of net balancing items

by LE 28.6 billion or 34.6 percent, to register LE 111.1 billion at end of March2007. This is in addition to a step-up of LE 13.0 billion or 2.6 percent in domesticcredit, to reach LE 522.5 billion.


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The increase in domestic credit reflected mainly the marked expansion in thecredit extended to the private business sector during the period by LE 19.9 billionor 8.3 percent, against LE 6.7 billion and 2.9 percent during the period of comparison. This brought the banking debt of this sector up to LE 259.3 billion(almost half of the total domestic credit) at end of March 2007. The higher creditreceived by this sector came in view of the larger role it is now playing in thedevelopment process, as its share of the total executed investments augmented to66.6 percent during the reporting period, and, in parallel, its contribution to GDProse to 62.1 percent. The units benefiting from the credit increase in this sector

were the services sector (47.8 percent), the agriculture sector (29.9 percent), andthe manufacturing (18.1 percent). Likewise, credit extended to the householdsector rose by LE 4.8 billion or 9.1 percent, posting LE 58.0 billion or 11.1 percentof total credit. On the other hand, credit extended to the public business sector declined by LE 9.2 billion or 28.1 percent (because of the settlements with to

banks), reaching LE 23.6 billion or 4.5 percent of the total.

Change in Domestic Credit by Sector (July / March)

-15-10

-505

10152025

30

2004/2005 2005/2006 2006/2007

Household sector Public business sector private business sector Government sector (Net)

LE bn

Credit to the government sector (calculated on a net basis, i.e. minusgovernment deposits at the banking system), dropped by LE 2.5 billion or 1.4

percent, bringing up its balance to LE 181.6 billion or 34.8 percent of totaldomestic credit at end of March 2007. Such a drop was a main outcome of adecline in banks acquisition of government securities and bills by LE 22.8 billion.However, loans to the government rose by LE 20.1 billion, and its depositsdropped by LE 0.2 billion.


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2/2: Banking Developments

2/2/1: Overview of Banks' Aggregate Financial Position

The number of registered banks operating in Egypt reached 41 at end of March 2007. Their aggregate financial position amounted to LE 879.6 billion,indicative of a rise of LE 118.0 billion or 15.5 percent during July/March,2006/2007, against LE 78.3 billion or 11.1 percent during the corresponding periodof the previous FY.

On the liabilities side, 46.5 percent of the increase was attributed to a surgeof LE 54.9 billion in banks liabilities to the CBE (mainly in foreign currencies). Inaddition , banks' deposits increased by LE 25.3 billion to LE 594.1 billion at end of March 2007, and provisions by LE 3.8 billion to LE 58.7 billion or 17.2 percent of the total lending and discount balances.

- 28 -

Growth Rates in Liabilities Composi tion during June/March

6.9

13.4

4.4

64.8

7.6

5.5

8.7

24.8

6.3

69.5

3.5

528.8

-10.1

-10.9

7.3

94.4

-19.4

Capital

Reserves

Provisions

Long-term loans & bonds

Obligations to banks abroad

Obligations to CBE

Obligations to banks in Egypt

Total deposits

Other liabilities

%

2005/2006

2006/2007


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- 28 -

Concerning assets, 38.5 percent of the increase was mainly due to a step-upof LE 45.5 billion worth in banks' investments abroad. In addition, there was a risein banks' balances with CBE by LE 40.4 billion (mainly deposits accepted at theCBE under open market operations) and in lending and discount balances by LE18.5 billion to LE 342.5 billion

On the other hand, banks portfolio investment declined by LE 13.0 billionto LE 180.9 billion at end of March 2007. Such a retreat was a result of the fall inlocal investments in treasury bills by LE 17.4 billion, in government bonds by LE5.5 billion, and non-government bonds by LE 2.2 billion. The fall was somewhatmitigated by the rise in investments in CBE notes by LE 10.3 billion, equity

participations by LE 1.1 billion, and foreign securities by LE 611.3 million worth.

Portfolio Structure

1.96.9

36.7

2.9

31.0

12.2 11.16.2

17.613.7

30.129.7

05

10152025303540

Treasury bi lls Gov . bonds Non-gov . bonds Corp. equities CBE notes Foreign s ec uri ties

% June 2006March 2007

Growth Rates in Assets Composition during June/March

3.9

62.7

36.9

5.7

64.1

15.1

42.1

2.3

65.0

-6.9

-6.7

-11.9

-0.9

-6.1Cash

Securities & investme nts in TBs

Balances with banks abroad

Balances with banks in CBE

Balances w ith banks in Egypt

Loan and discount balances

Other assets

%

2005/2006

2006/2007


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- 29 -

As for local banks transactions with banks abroad, the credit position of local banks rose by LE 45.2 billion worth or 70.8 percent during the period under review to LE 109.0 billion worth at end of March 2007. The increase was anoutcome of a pickup in balances with banks abroad by LE 45.5 billion worth, anda slight rise in their obligations thereto by LE 0.3 billion worth.

Transactions with Banks Abroad(LE mn)

March/Change during JulyJune 2006 March 2007 2006/2005 2006/2007End of

Value % Value %Net Position 63784 108967 25444 65.3 45183 70.8Balances at banks abroad 72554 118042 21535 42.1 45488 62.7Obligations to banks abroad 8770 9075 (3909) (31.9) 305 3.5

1/2/2: Inter-bank Money Market in Egypt

The volume of deposits in the inter-bank money market declined from LE

12.1 billion at end of June 2006 to LE 11.3 billion at end of March 2007. Thedecrease was a net result of a LE 1.6 billion fall in foreign currency deposits, and aLE 0.7 billion increase in those in local currency.

Volume of Inter-bank Money Market in Egypt(LE mn)

March/Change during JulyJune 2006 March 2007 2005/2006 2006/2007End of

Value % Value %Total 12098 11267 )1811( )11.9( )830( )6.9(Balances in local currency

5776 6513 1146 15.9 738 12.8Balances in foreign currencies 6322 4754 (2957) (36.9) (1568) (24.8)

1/2/3: Deposits

Total deposits at banks (including government deposits) went up by LE 25.3 billion during the period under review, against LE 32.6 billion during the period of comparison. Reaching LE 594.1 billion at end of March 2007, banks' depositsconstituted 67.5 percent of the aggregate financial position of banks.


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- 30 -

Change in Deposits during July/March

Around 80.6 percent of the increase in total deposits was in the householdsectors LE deposits. Rising by LE 20.4 billion or 7.1 percent during the periodunder review, against LE 21.7 billion and 8.6 percent during the period of comparison, these deposits amounted to LE 308.3 billion, or almost three quarters

of total local currency deposits and 51.9 percent of total deposits at end of March2007. A breakdown of the sectors deposits by maturity indicates that LE time andsaving deposits represented 92.1% of the sector's total deposits in local currency atend of March 2007. The above-mentioned indicators showed a higher propensity tosave in the Egyptian pound, especially with the improvement in its exchange rate.

2005/2006

24.3LE bn( 75%)

8.3LE bn( 25%)

2006/2007

15.9 LEbn (63%)

9.4LE bn(37%)

Local CurrencyForeign Currency

Change in Deposits during July March /

8.1

17.0

(0.8)

9.3

2.44.13.7 3.5

(0.4)

8.0

(2.1)

5.0

(4)(2)02468

1012141618

Demand Time &saving

Blocked or retained

Demand Time &saving

Blocked or retained

L. E. bn

Local Currency Foreign Currency

2006/20072005/2006


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- 31 -

Deposits of the private business sector also augmented by LE 15.0 billion toLE 95.7 billion, representing 16.1 percent of total deposits at end of March 2007.About 66.8 percent of the increase was in local currency deposits that mounted byLE 10.0 billion. The sectors deposits in foreign currencies scaled up by LE 5.0

billion worth.

On the other hand, local currency deposits of the government sector retreated by some LE 16.9 billion. This was a direct result of applying the

provisions of Law no. 139 for 2006 regarding the opening of a Treasury SingleAccount (TSA) at the CBE, where the accounts of government entities, andeconomic and services authorities are transferred from banks thereto.

Change in local currency deposits by sectorsduring July March/

(16.9)

(2.8)

1.11.8

10.0

3.1

21.720.4

0.5 1.2

(20)(15)(10)

(5)05

10152025

2005/2006 2006/2007

L E

b n

Government sector Public business sector Pr ivate bus ine ss s ector Hous ehold se ctor Foreign s ector

Changein foreign currencydeposits by sectorsduringJuly March/

1.30.20.7 0.4

5.65.0

0.5

3.9

0.20 (0.04)

(1)0123456

2005/2006 2006/2007

L E

b n

Government sector Public business sector Private business sector Household sector Foreign sector


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- 32 -

2/2/4: Lending Activity

During the period under review, banks' lending activity remarkablyexpanded, relative to the period of comparison. Banks' credit facilities rose by LE18.5 billion or 5.7 percent against LE 7.0 billion and 2.3 percent, reaching therebyLE 342.5 billion, constituting 38.9 percent of banks total assets and 57.7 percentof total deposits at end of March 2007. The rise was an outcome of the increase inlocal currency loans by LE 4.5 billion or 1.9 percent, to reach LE 243.4 billion or

71.0 percent of total lending and discount balances at end of March 2007, and the pickup in foreign currency loans by LE 14.0 billion or 16.4 percent to LE 99.1 billion worth, on the other.

The rise in total lending and discount balances was mainly attributed to themarked increase in loans to the private business sector. Lending to this sector mounted by LE 18.1 billion or 8.4 percent, against a slight rise of LE 1.4 billion or 0.7 percent), therefore reaching LE 232.7 billion or 67.9 percent of the totallending and discount balances at end of March 2007. The rise in the lending to the

sector reflects the surge in local currency loans (LE 9.2 billion), and foreigncurrency loans (LE 8.9 billion worth). Almost half of the increase was in theservices sectors loans (47.8 percent), followed by agriculture (29.9 percent), andmanufacturing (18.1 percent).

- 33 -

Change in credit facilityinlocal currencyduring

July March/

0.20.2 0.1(0.1)

(2.2)(8.5)

(4.9)

9.2

3.67.7

(9)(7)(5)(3)(1)1357911

2005/2006 2006/2007

L E b

n

Governm ent sector Public business sector Private business sector Household sector Foreign s ector


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- 33 -

Loans to the household sector also augmented by LE 4.8 billion (against LE8.6 billion) recording LE 58.0 billion or 16.9 percent of total lending and discount

balances at end of March 2007. However, loans to the public business sector decreased under the settlement of its debts to banks.

Over one year loans and advances (excluding discounts), extended by banks,

accounted for 73.7 percent of the total increase in loans. They went up by LE 13.5 billion or 10.2 percent during the period, to LE 145.6 billion at end of March 2007.More than half of the increase realized during the period was in foreign currencyloans, reflecting as such the drop in lending costs given the rise in the LE valueand the expectations of its continued improvement.

Changein credit facilityin foreign currenciesduringJuly March /

4.16.3

0.5 0.4

(0.9) (0.6) (0.8)

8.9

1.30.8

(5)

0

5

10

2005/2006 2006/2007

L E

b n

Government sector Public business sector Private business sector Household sector Foreign s ector

Change incredit facility economicactivity during July March /

(1.1)

5.09.7

6.4

25.3

(4.6) (2.1)

(17.5)

(1.0)

5.3

(20)

(10)

0

10

20

30

Agriculture Industry Trade Services Unclassifiedsectors

L E

b n

2005/2006

2006/2007


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- 34 -

One year or less loans and advances scaled up by some LE 4.8 billion or 2.5 percent to stand at LE 195.7 billion at end of March 2007. This rise was anoutcome of the pickup in foreign currency loans by LE 6.1 billion worth and thedecline in local currency loans by LE 1.3 billion.

Loans and Advancesby Maturity and Currency*

(LE mn)

March/Change during July2005/2006 2006/2007End of

Value % Value %Total 7553 2.5 18255 5.7One year or less 2878 1.5 4795 2.5In local currency 1136 0.8 (1324) (0.9)In foreign currencies 1742 4.4 6119 14.0More than one year 4675 3.9 13460 10.2In local currency 47 0.1 5746 6.3In foreign currencies

4628 13.2 7714 18.8* Excluding discounted commercial papers


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- 35 -

3- Stock Exchange

The Ministry of Investment (MOI) and the Capital Market Authority (CMA)continued their interest to improve the Stock Exchange, in order to enhancestability and protect investors. In this context, efforts were exerted to create anenabling legislative and regulatory environment and upgrade the CMAs regulatory

performance in order to minimize the potential risks to the stock market.

To this end, the MOI and the CMA issued a number of decrees duringJanuary/March 2007. The Minister of Investments Decree No. 12/2007 wasissued, adding a new chapter to the Executive Regulations of the Capital MarketLaw, on new regulation for the purchase of shares of joint venture companies for merger and acquisition purposes. Moreover, the CMAs Board of Directors issuedthe following decisions:

- Decision no. (2)/2007 regarding the contracts of repos (bonds), concluded by bond brokerage, dealing and intermediaries companies.

- Decision no. (10)/2007 on the rules of splitting the nominal value of listed

shares.- Decision no. (11)/2007 on the executive rules of corporate governance of

unlisted securities companies.- Decision no. (14)/2007 concerning issuing the capital adequacy

requirements for securities.- Decision no. (24)/2007 issuing rules for licensing the staff of securities

brokerage companies, to raise their efficiency and upgrade the performanceof securities intermediaries in the market.

- Decision no (41)/2007 organizing the activities of independent financial

advisors and other providers of advisory or valuation reports with respect tocapital increase or acquisition.

Moreover, the Prime Minister issued Decree no. (505)/2007 regulating the placement of public stakes in joint venture companies or public enterprises whoseshares are listed in CASE. The Decree pointed out that the guiding fair value is to

be determined according to average closing prices during the past six months prior to the placement, provided that those shares comply with the rules of CASEconcerning active shares.


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- 36 -

The efforts exerted to improve the stock market, along with the recentfinancial and banking reform measures, helped attract new Arab and foreigninvestors to the market, and drove its indices. Accordingly, CASE 30 moved up to7191.9 points at end of March 2007, by 50.7 percent during the period under review. Also, the CMA indicator recorded 2483.02 points at end of March 2007,with an increase of 46.3 percent during the period.

26-March27-Feb

6-Feb

1-Feb

3000

4000

5000

6000

7000

8000

9000

J u n e

- 0 6

J u l y

- 0 6

A u g u

s t - 0

6

S e p

t e m b e

r - 0 6

O c t o b

e r - 0

6

N o v

e m b e

r - 0 6

D e c

e m b e

r - 0 6

J a n u

a r y - 0 7

F e b r u

a r y - 0 7

M a r c h

- 0 7

1400

1600

1800

2000

2200

2400

2600

2800

3000Case30

Capital MarketAuthority

CMA & (CASE 30) Indices

Referendums on the Constitutionalamendments

Dramatic Drop in theAmerican Exchange

Customs cutson 1114 items

Maintaining the overnight deposit andlending rates at 8.75% and

10.75%,respectively

Indicators of the overall dealing on shares and bonds on the Exchangerevealed that the trading volume of securities scaled up by 47.5 percent, reaching7.9 billion papers during July/March 2006/2007, against 5.3 billion papers duringthe corresponding period of the previous FY. Likewise, market capitalization rose

by 21.9 percent during the period, reaching LE 547.9 billion and representing 75.1 percent of GDP at end of March 2007.


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- 37 -

0

100

200

300

400

500

600

June 2005 Sept. Dec. Mar. 2006 June Sept. Dec. Mar 20073035404550

556065707580

L.E. bn

The Market Capital as a Percentage of GDP%

The sectoral distribution of market capitalization shows that the sector of

finance, insurance and real estate attracted most of the investments during the period. As such, the relative importance of this sector picked up to 31.2 percent at

end of March 2007, from 26.7 percent at end of June 2006. On the other hand, therelative importance of the manufacturing sector declined to 31.7 percent, from 36.2

percent.

Market Capitalization by Sector(LE mn)

At End of June2006 %March2007 %

Total 377070 100.0 547933 100.0Agriculture, forests and fishing 1291 0.3 1506 0.3

Extractions 1090 0.3 3826 0.7Construction 2987 0.8 3418 0.6Manufacturing 136575 36.2 173593 31.7Transportation, communications,electricity, gas and health 60304 16.0 74211 13.5Wholesale and retail trade 2178 0.6 2638 0.5Finance, insurance and real estate 100565 26.7 170728 31.2Services 72080 19.1 118013 21.5

Source: CMA


46/168

- 38 -

Foreigners' transactions on the Egyptian Exchange (in LE and US dollar)were active during the period. They registered net purchases of LE 20.3 billionduring the period, against LE 3.4 billion. This denoted an increase in the value of their purchases (LE 59.0 billion) over their sales (LE 38.7 billion), against LE 56.3

billion and LE 52.8 billion, respectively.

Foreigners' Transactions on the Stock Exchange

July/March2005/2006 2006/2007During

Purchases Sales Net Purchases Sales NetTradingvolume (000s) 984014 849252 134762 1524613 1084869 439744Trading value(LE mn) 56252 52844 3408 58992 38700 20292

* Source: CMA

The Stock Exchange trading structure continued to signify greater activity for individual investors than institutions. At end of March 2007, individuals accountedfor 60.0 percent of the total trading value, against 61.0 percent at end of June 2006.


47/168

- 39 -

3/1: Shares Market

3/1/1: Primary (Issue) Market

a) New Issues

The CMA approved during the reporting period 2003 new issues, 1353 of which, went to new incorporations, with a number of shares reaching 1.3 billion ata value of LE 26.1 billion or 35.3 percent of the total value. Issues to increase thecapital of existing companies reached 650, with 2.0 billion shares at a value of LE47.9 billion or 64.7 percent of the total issues during the period.

New Share Issues on the Exchange

March/JulyDuring2005/2006 2006/2007

Total Number of Issues (Unit) 1589 2003 New incorporations 983 1353Capital increase of existing companies 606 650

Total Number of Shares (mn) 2178 3304 New incorporations 185 1277Capital increase of existing companies 1993 2027

Total Value of Shares (LE mn) 28937 73996 New incorporations 3711 26136Capital increase of existing companies 25226 47860

Source: CMA (Information Center)


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- 40 -

b) Companies Listed on the Exchange

The number of listed companies dropped to 565 at end of March 2007,

against 656 companies at end of June 2006. However, the nominal value of their capital went up to LE 119.6 billion (against LE 109.2 billion).

Companies Listed on the Exchange(LE mn)

June 2006 March 2007End of No. of

Companies(Unit)

NominalCapital

MarketCapital

No. of Companies

(Unit)

NominalCapital

MarketCapital

Total 656 109165 377070 565 119615 547945Listed on officialschedules 141 58432 298478 142 70123 453511Listed on unofficialschedules 503 50354 78013 420 49210 93986Listed on thetemporary schedule 12 379 579 3 282 448

Source: CASE

3/1/2: Secondary (Trading) Market

The trading value of shares (in LE and US dollar) slightly rose by 0.53 percent during the period, as compared with the corresponding period of the preceding FY, thereby reaching LE 189.4 billion.


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Trading in Shares on the Exchange

July/March2005/2006 2006/2007

During No. of Transactions

(Unit)

Volume(000s)

MarketValue(mn)

No. of Transactions

(Unit)

Volume(000s)

MarketValue(mn)

Total Trading on

the Floor in LE 4331593 4348799 178114 5445923 6878515 176865

Shares in LE 4202577 4139415 168221 5227896 6401182 170616Shares in US$ 129016 209384 1713 218027 477333 1091

Total Trading over

the Counter in LE 175437 988542 10240 181068 1000672 12487

Shares in LE 175054 869194 7099 174275 846151 9812

Shares in US$ 383 119348 545 6793 154522 467Source: CMA

Shares traded on the floor represented 93.4 percent of the total transactionsin shares, mainly LE shares, which recorded a value of LE 170.6 billion. Dealingsin US dollar shares reached only US$ 1.1 billion. The finance, insurance and real-estate sector accounted for 47.1 percent of the total value of shares traded in theEgyptian pound and 91.1 percent of those traded in US$. Traded OTC sharesincreased by 21.9 percent, reaching LE 12.5 billion, and reflecting the rise of traded shares in LE.


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3/2: Bonds Market

3/2/1: Primary (Issue) Market

Total nominal value of issued bonds (listed) declined by LE 6.6 billionduring the period, to stand at LE 59.2 billion at end of March 2007. This declinewas mainly ascribed to the amortization of government bonds (mainly treasury

bonds) in the amount of LE 4.3 billion, and corporate bonds of LE 1.9 billion.

Bonds Listed on the Exchange

(LE mn)June 2006 March 2007At End of

Listed % Listed %Total 65724.7 100.0 59159.7 100.0Government Bonds 58951.1 89.7 54601.7 92.3- Treasury bonds 11000.0 16.7 7000.0 11.8- Treasury bonds (primary

dealers system) 47000.0 71.5 47000.0 79.5- Housing bonds 121.7 0.2 117.9 0.2- Dollar development bonds 829.4 1.3 483.8 0.8Corporate Bonds 5572.5 8.5 3693.4 6.2Bank Bonds 1201.1 1.8 150.0 0.3Securitization Bonds - - 714.6 1.2Source: CASE

3/2/2: Secondary (Trading) Market

Trading in bonds (on the floor and OTC) sharply decreased during the period. The trading value of bonds (in LE and US dollar) amounted to LE 7.2 billion, against LE 9.5 billion during the period of comparison. Trading on thefloor was concentrated in LE bonds, as 8.6 million papers were dealt in, at a valueof LE 7.1 billion (of which, treasury bonds under the primary dealers systemrepresented LE 6.9 billion), through 521 transactions. The volume of trading in USdollar bonds rose to 0.2 million papers at a value of US$ 21.3 million, conductedthrough 9 transactions.


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Trading in Listed Bonds on the Floor

July /March2005/2006 2006/2007

During No. of Transactions

(Unit)

Quantityof dealt-in bonds

(000s)

Value of dealt-inbonds

(000000s)

No. of Transactions

(Unit)

Quantityof dealt-in bonds

(000s)

Value of dealt-inbonds

(000000s)Total Bonds (LE) 491 9188.1 9073.3 521 8564.9 7071.2

Treasury bonds 11 57.3 61.0 7 431.6 21.1T. Bonds (primary

dealers system) 381 8192.3 8909.2 440 6552.9 6884.9Housing bonds 51 5.4 0.3 18 1.3 0.0Corporate bonds 46 931.1 102.6 53 1579.1 164.2Bank bonds 2 2.0 0.2 3 0.0 1.0Total Bonds (US$) 2 21.3 2.2 9 207.3 21.3Development bonds - 0.0 0.0 - - 0.0Corporate bonds 2 21.3 2.2 9 207.3 21.3

Source: CMA

It is to be noted that OTC dealings were limited to the US dollar bonds of asingle company at a value of US$ 2.2 million.

3/3: Mutual Funds

CMA approved the inception of six new mutual funds during July/March2006-2007, thus raising their total number to 36 (33 are open-ended and 3 areclosed) at end of March 2007. Consequently, the par value of mutual fundcertificates increased to LE 7.4 billion, while their market value amounted to LE14.0 billion, at end of March 2007 (against LE 6.6 billion and LE 10.5 billion,respectively, at end of June 2006).


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Ratio Structure of the Budget Sector Revenues during July /March 2006/2007

Other Taxes8.1%

International Trade7.0%

Taxes on Goods &Services

24.4%

Taxes on Property1.2%

Property Income29.6%

Sales of Goods &Services

3.6%Taxes on Income,

and Profits26.1%

Collected tax revenues rose by some LE 5.7 billion or 9.8 percent during the period, to reach about LE 64.3 billion or 61.0 percent of total collected revenues.More than half of the increase (55.1 percent) was in collected taxes on income and

business profits which picked up by almost LE 3.2 billion or 13.0 percent over thelevel of the corresponding period, to reach some LE 27.5 billion or 42.8 percent of total tax revenues. The increase in income and business profit taxes was mainlyascribed to higher collection of corporate taxes, surging by LE 3.5 billion or 97.7

percent, to some LE 7.1 billion. The noticeable rise in the proceeds of these taxesreflected the successful implementation of the New Tax Law. The adoption of thisLaw increased the number of taxpayers, (including the new firms that had not beenregistered before), especially after reducing taxes to more reasonable levels. Taxescollected from the Suez Canal Authority (SCA) went up by about LE 1.4 billion or 26 percent, to approximately LE 6.7 billion. Likewise, there was an increase in thecollected income taxes payable by individuals, which augmented by LE 335.0million or 5.7 percent, to LE 6.2 billion. In the meantime, taxes from the EGPCdropped by nearly LE 2.1 billion or 21.5 percent, to register LE 7.5 billion.


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Ratio of Tax Revenues & Property Income / Total Revenues duringthe period July / March

0 20 40 60 80 100

2003/2004

2004/2005

2005/2006

2006/2007

Tax Revenues Property Income

%

Tax earnings on sales of local and imported goods & services picked up by

LE 1.6 billion (28.5 percent of the increase in total tax revenues), to post some LE25.7 billion. Moreover, earnings of customs dues rose by about 4.4 percent,compared with the same period of the previous FY, to reach LE 7.3 billion or 76.5

percent of the total estimated for the whole FY 2006/2007.

0 5 10 15 20 25 30

2003/2004

2004/2005

2005/2006

2006/2007

Sales Taxes Customs Duties

%

Ratio of Sales Taxes & Customs Duties / Total Revenues during theperiod July / March


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Collected property income reached some LE 31.1 billion or 29.6 percent of total collected revenues, with a rise of LE 4.9 billion or 18.6 percent, thanks to therevenues collected from the third mobile license award during the first quarter of FY 2006/2007. Moreover, transfers of profit surpluses of the SCA rose by LE 1.3

billion. In contrast, profit transfers of the EGPC dropped by LE 3.3 billion, and sodid those of some economic authorities.

Expenditures totaled about LE 127.8 billion, with an execution ratio of 58.8

percent of the total estimated for the whole FY, and a rise of LE 3.1 billion or 2.5 percent compared with the corresponding period of the preceding FY. It should benoted that expenditures posted a rise in spite of the remarkable drop in subsidies(as shown later).

The bulk of the increase in total expenditures was in the compensations of employees (including cash, in-kind & insurance benefits). As such, they rose byabout LE 4.4 billion or 13.8 percent during the reporting period, to some LE 35.9

billion or 28.1 percent of total expenditures, representing 4.9 percent of GDP. Theincrease was chiefly attributed to the salary raise approved for all civil servants atthe beginning of FY 2006/2007, and to the costs of incorporating the allowance of FY 2001/2002 in basic salaries.

Other Expenditures11.7%

Subsidies 17.3%

Investments 8.5%

Grants & SocialBenefits 2.3%

Interests 25.0%

Purchases of Goods & Services

7.1%

Compensations of Employees

28.1%

Ratio Structure of the Budget Sector Expenditures duringJuly/March 2006/2007


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Interest payments (domestic and external) significantly increased by LE 10.5 billion or 48.8 percent over the level of the previous corresponding period, to reachsome LE 32.0 billion, or about a quarter of total expenditures. Domestic interest

payments amounted to some LE 29.3 billion, up by 55.4 percent, mainly due to asurge in interest payments of the banking system, the NIB and pension funds.External interest payments rose by only 1.0 percent, in accordance with thegovernments policy of minimizing external borrowing.

Investment expenditures of the administrative system, local administrationand service authorities, as prioritized in the Economic and Social DevelopmentPlan, amounted to some LE 10.8 billion, up by 9.5 percent over the corresponding

period of the previous FY.

Subsidies went down by about LE 6.3 billion or 22.2 percent, posting someLE 22.1 billion or 17.3 percent of total expenditures. The decline was a main resultof the fall in subsidies to the EGPC by 41.8 percent because of oil subsidy cuts.Meanwhile, subsidies to GASC stepped up by 26.2 percent, and to other subsidyitems (such as farmers, export promotion, passengers transport, health insurance,industrial zones, and interest payments of concessional loans) by 34.7 percentcompared with the previous corresponding period.

Ratio of Subsidy & Paid Interest / Total Expenditures duringthe period July / March

05

1015202530

2003/2004 2004/2005 2005/2006 2006/2007

Interests Subsidies

%


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II- Consolidated Fiscal Operations of the GeneralGovernment (Budget Sector, NIB and SIFs)

With the addition of the fiscal operations of the NIB and SIFs to those of the budget sector, collected revenues augmented by about LE 17.5 billion, to some LE122.8 billion. Likewise, expenditures rose by some LE 15.4 billion, to post aboutLE 143.3 billion.

Execution of Consolidated Fiscal Operations of General Government(Budget Sector, NIB and SIFs)(Total Revenues)

(LE bn)BudgetSector

RelativeStructure

ActualExecutionRatio of the TotalEstimatedfor theYear

GeneralGov. *

RelativeStructure

ActualExecutionRatio of the TotalEstimatedfor theYear

Total Revenues 105.3 100.0 64.2 122.8 100.0 64.5Tax Revenues 64.3 61.0 60.8 64.3 52.3 60.8Taxes on income, profits 27.5 26.1 51.3 27.5 22.4 51.3

From EGPC 7.5 7.1 27.9 7.5 6.1 27.9From SCA 6.7 6.4 76.1 6.7 5.5 76.1From CBE 0.0 0.0 0.0 0.0 0.0 0.0From other units 7.1 6.7 99.4 7.1 5.7 99.4Payable by individuals 6.2 5.9 57.9 6.2 5.1 57.9

Taxes on property 1.3 1.2 106.9 1.3 1.0 106.9Taxes on goods & Services 25.8 24.4 69.7 25.8 20.9 69.7Customs 7.3 7.0 76.5 7.3 6.0 76.5

Other Taxes 2.4 2.3 56.1 2.4 2.0 56.1Grants 2.1 2.0 62.3 2.1 1.8 62.3Other Revenues 38.9 37.0 .970 56.4 45.9 69.4Property income 31.1 29.6 72.4 34.8 28.3 70.1Sales of goods & services 3.8 3.6 44.2 3.8 3.1 44.2Financing investment 0.7 0.7 50.7 0.7 0.6 50.7Others 3.3 3.1 173.8 17.1 13.9 79.0Source: Ministry of Finance* Including the budget sector, and fiscal operations of NIB and SIFs.

Percentages are calculated in terms of LE million.


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Execution of the Consolidated Fiscal Operations of theGeneral Government

(Budget Sector, NIB and SIFs)(Total Expenditures)

(LE bn)BudgetSector

RelativeStructure

ActualExecutionRatio of the TotalEstimatedfor the Year

GeneralGov. *

RelativeStructure

ActualExecutionRatio of the TotalEstimatedfor the Year

Total Expenditures 127.8 100.0 58.8 143.3 100.0 60.4Compensations of Employees 35.9 28.1 69.8 36.3 25.3 69.7

Purchases of Goods& Services 9.1 7.1 58.6 9.1 6.4 58.5Interests 32.0 25.0 63.0 24.6 17.1 61.5Subsidies, Grants& Social Benefits 25.3 19.8 43.3 47.7 33.3 54.6

Subsidies 22.1 17.3 41.1 22.1 15.4 41.1Grants 1.6 1.3 70.8 1.6 1.1 70.8Social benefits 1.4 1.0 89.4 23.8 16.6 78.1Others 0.2 0.2 25.6 0.2 0.2 25.6

Other Expenditures+ 14.7 11.5 70.4 14.8 10.3 67.5Purchases of Non-Financial

Assets (Investments) 10.8 8.5 53.5 10.8 7.6 53.5 Source: The Ministry of Finance* Including the budget sector, and fiscal operations of NIB and SIFs

Percentages are calculated in terms of LE million.+ Of which, LE 12.9 billion are allocations to defence.

The aforementioned developments resulted in a cash deficit of about LE20.5 billion in the consolidated fiscal operations of the general government duringJuly/March 2006/2007. With the addition of the net acquisition of financial assets(some LE 8.6 billion), the overall deficit reached about LE 29.1 billion.


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Execution of the Consolidated Fiscal Operationsof the General Government

(Budget Sector, NIB and SIFs)(Cash and Overall Deficit/Surplus and Financing Sources)

(LE bn)

BudgetSector

RelativeImportance

ActualExecution

Ratio of theTotal

Estimatedfor the Year

GeneralGov. * RelativeImportance

ActualExecution

Ratio of theTotal

Estimatedfor the Year

Total Revenues 105.3 64.2 122.8 64.5Total Expenditures 127.8 58.8 143.3 60.4

Cash Deficit 22.5 42.2 20.5 43.8 Net acquisition of financial assets 6.5 73.1 8.6 99.5

Overall Deficit 29.0 46.6 29.1 52.5Financing Sources 29.0 100.0 46.6 29.1 100.0 52.5

Domestic Financing 27.3 94.0 41.7 27.4 94.0 45.0Banking financing -1.5 -5.1 -4.0 -0.3 -0.9 -0.7

Non-bankingfinancing 27.0 93.0 94.5 25.9 88.9 102.3

Net credit anddebit liabilities 1.8 6.1 1.8 6.0

Foreign Borrowing -1.4 -4.7 26.4 -1.4 -4.7 26.4Arrears -0.5 -1.6 -0.5 -1.6 -Others -0.9 -3.1 90.3 -0.9 -3.1 27.4Financing Effects forEliminations 0.0 0.0 0.0 0.0Exchange RateRevaluation -0.5 -1.8 -0.5 -1.8Net Privatization

Proceeds 0.1 0.4 3.5 0.1 0.4 3.5Differences betweenTreasury Bills FaceValue and PresentValue -0.7 -2.6 - -0.7 -2.6 -

Discrepancy 5.6 19.4 - 5.6 19.4-

Source: The Ministry of Finance* Including the budget sector, and fiscal operations of NIB and SIFs.

Percentages are calculated in terms of LE million.0.0 Less than LE 0.1 billion


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4/2: Domestic Public Debt

Gross domestic public debt, including obligations of the government, publiceconomic authorities and NIB, reached some LE 619.5 billion (84.9 percent of GDP) at end of March 2007, up by LE 26.0 billion or 4.4 percent duringJuly/March 2006/2007. Government debt accounted for 75.6 percent of the total,debt of public economic authorities 7.5 percent and net debt of the NIB 16.9

percent.

Domestic Public Debt at end of March 2007

NIB debt

Government

debt

Economic

authorities

Gross Domestic Public Debt

(LE bn )June 2006 March 2007 Change + (-)At End of

Value % Value % Value %Gross Domestic PublicDebt (1+2+3) 593.5 100.0 619.5 100.0 26.0 4.41. Government, 387.7 65.3 468.3 75.6 80.6 20.8

of which, short-termTBs 103.2 17.4 110.7 17.9 7.5 7.3

2. Public economic auth. 47.4 8.0 46.3 7.5 (1.1) (2.4)3. NIB (net) 158.4 26.7 104.9 16.9 (53.5) (33.8)


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As of the 1 st of July 2006, the balance of government debt to the NIB wastotally cleared to zero. Moreover, the NIBs obligations towards the two insuranceand pension funds were transferred to the government within the balance of thegovernment debt due to the Bank up till the 30 th of June 2006. A new item was

introduced, entitled bonds for the Social Insurance Funds for Civil Servants andPublic and Private Business Sector Employees (SIFs bonds), amounting to LE197.7 billion.

At end of March 2007, domestic government debt reached LE 468.3 billion,up by LE 80.6 billion or 20.8 percent during July/March 2006/2007. The increasewas an outcome of a rise of LE 201.8 billion in the balances of treasury bonds and

bills and a retreat of LE 21.4 billion in the government net credit position with the banking system on the one hand, and the LE 142.6 billion drop in the NIB debt to

the two funds as mentioned above, on the other hand.The rise in the balance of bonds by about LE 194.3 billion was a main result

of the following issues and amortizations: Floating two Treasury bond issues on the 1 st of July 2006 for the benefit of

the two funds in the amount of about LE 197.7 billion, against the transfer of the NIBs obligations thereto to the Public Treasury.

The value increase of the Treasury bond issue of September 2005 by LE2.0 billion, to reach LE 6.0 billion, as per the same issuance terms andconditions.

Amortization of Egyptian Treasury bonds (LE 4.0 billion) on the 1 st of January 2007.

The decline of LE 1.2 billion worth in the balance of dollar-denominatedsovereign bonds held by resident financial institutions, due to theamortization of the first tranche of these bonds in July 2006.

4/2/1: Domestic Government Debt


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Treasury bills increased by some LE 7.5 billion at end of March 2007. The bulk of the increase was in banks' subscriptions (about 69.0 percent), followed byforeigners' subscriptions (24.1 percent), insurance companies and funds (3.6

percent), mutual funds (2.6 percent) and other entities (0.7 percent).

Domestic Government Debt

(LE bn)ChangeMarch 2007June 2006

+ (-)%Value%ValueBalances at End of

80.6100.0468.3100.0387.7Total Debt201.8117.8551.890.3350.0-Balances of Bonds and Bills194.394.2441.163.7246.8 Notes and Bonds*(3.2)12.860.016.363.2Of which: tradable on exchanges

7.523.6110.726.6103.2 Treasury bills

21.4-17.8-83.5-27.1-104.9- Net Balances at the BankingSystem

15.64.420.71.35.1 Facilities5.8-22.2-104.2-28.4-110.0 Deposits

(142.6)0.00.036.8142.6- Borrowing from NIB

64.262.8Total debt/GDP (%)Source: Ministry of Finance, CBE and NIBRatios are calculated in terms of LE million.* Including treasury bonds; housing bonds; bonds denominated in foreign currencies with public commercial banks;

the 5 percent ratio retained from profits of corporations subject to Law No. 97 of 1983 for the purchase of government bonds; and the holdings of resident financial institutions (banking system and insurance sector) of dollar-denominated sovereign bonds tradable on world exchanges.

Government Domestic Debt

-200

0

200

400

600

Borrowing from the NIBBondsTreasury BillsNet Balances with the Banking System

June2005March 2007

LEbn


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4/2/2: Debt of Public Economic Authorities

Debt of these authorities declined by LE 1.1 billion during July/March2006/2007, to LE 46.3 billion at end of March 2007. This drop is an outcome of two developments: 1- an improvement of LE 2.5 billion in their net credit positionwith the banking system (due to a rise in their deposits by LE 6.9 billion,exceeding as such the LE 4.4 billion pickup in their borrowings). 2- NIB lending tothese authorities stepped up to about LE 1.4 billion.

Economic Authorities Debt

-100

102030405060

June 2006 March 2007

Borrowing of Economic Authorities from NIB

Net Balances of Economic Authorities with the Banking System

LE bn


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Debt of Public Economic Authorities(LE bn)

June 2006 March 2007 ChangeBalances at End of

Value % Value % + (-)

Total Debt 47.4 100.0 46.3 100.0 (1.1)

- Net balances with the

banking system -2.8 -5.9 -5.3 -11.5 (2.5)

Facilities 23.4 49.3 27.8 60.1 4.4 Deposits -26.2 -55.2 -33.1 -71.6 (6.9)

- Borrowing from NIB 50.2 105.9 51.6 111.5 1.4

Total Debt/GDP ( %) 7.7 6.3

Source: Ibid

4/2/3: Resources and Uses of the NIB

NIB resources declined by LE 196.2 billion during July/March 2006/2007,to LE 158.8 billion at end of March 2007. This decline is attributed to a retreat of LE 197.7 billion in the surpluses transferred to the NIB from the two SocialInsurance Funds, after the balance of government debt to the NIB was totallycleared to zero, as mentioned above. Moreover, the resources transferred from

private insurance funds, the saving certificates, the deposits of various entities alldecreased by about LE 1.5 billion; and so did the receipts from the US dollar development bonds by LE 0.3 billion. Such a decrease was counterbalanced by arise in the investment certificate proceeds and the accumulated interest oninvestment certificates (group A) by some LE 3.3 billion. It is worth mentioningthat the interest on these certificates rose by 0.5 percent on group A, to reach 9.5

percent, and by 10.0 percent on group B, as of the 1 st of February 2007 (Minister of Finance's Decree No. 40 for 2007).


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Resources and Uses of NIB(LE bn)

June 2006 March 2007Balances at End of Value % Value %

Change+ (-)

Resources 355.0 100.0 158.8 100.0 (196.2) Social Insurance Fund for

Civil Servants 135.7 38.2 25.0 15.8 (110.7) Social Insurance Fund for

Public and PrivateBusiness Sector Employees 105.7 29.8 18.7 11.8 (87.0)

Investment certificate proceeds 64.1 18.1 67.1 42.2 3.0

Accumulated interest oninvestment certificates(group A) 7.0 2.0 7.3 4.6 0.3

US dollar development bonds 0.8 0.2 0.5 0.3 (0.3)

Post office saving accounts 39.1 11.7 39.1 24.6 - Others 2.6 0.7 1.1 0.7 (1.5)Uses 355.0 100 158.8 100.0 (196.2) Government 142.6 40.2 0 - (142.6) Public economic

authorities 50.2 14.1 51.6 32.5 1.4 Others 158.4 44.6 104.9 66.1 (53.5) NIB balances with the

banking system (net) 3.8 1.1 2.3 1.4 (1.5)Debt of NIB/ GDP ( %) 25.6 14.4

Source: Ibid

NIB used LE 51.6 billion (about 32.5 percent of its total resources) tofinance the investments of public economic authorities. The Bank allocated aroundLE 104.9 billion to its various activities (i.e., concessional lending to low-costhousing, and lending to holding companies and their affiliates).


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Domestic public debt service posted some LE 30.7 billion or 29.1 percent of total public revenues (4.2 percent of GDP) during the statement period, down byLE 3.1 billion below the corresponding period of the previous FY. The retreat wasan outcome of a drop in principal repayments by LE 13.5 billion and a rise ininterest payments by some LE 10.4 billion.

Domectic Debt Service Ratio/ GDP

0

1

2

3

4

5

6

July / Sept. July / Dec. July / March

2005/2006 2006/2007

%


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5- External Transactions5/1: Foreign Exchange Market

The ongoing economic and banking reforms contributed to fostering theconfidence of foreign investors in the Egyptian economy and encouraging their investments in Egypt, therefore, increasing foreign currency inflows. This was

positively reflected on the stability and volume of transactions on the forex market.As such, July/March 2006/2007 witnessed a remarkable improvement in the

market transactions as compared with the corresponding period of the previous FY.Market resources increased by US$ 9.7 billion to US$ 32.5 billion, therebyexceeding the rise in utilizations (only US$ 6.3 billion to US$ 24.4 billion).Accordingly, market transactions recorded a surplus of US$ 8.1 billion during the

period under review, against US$ 4.8 billio

EconomicReview 2006 2007-Vol 3 Eng

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