The economic situation in Egypt

The economic situation in Egypt
 The Egyptian government has issued through four government banks: Cairo, Ahli, Egypt and the Suez Canal, certificates in the name of the Suez Canal in 2014, at an annual rate of 12%, which was the highest in the country at the time; Suez Canal, and the country has already collected 68 billion pounds, but the acceptance of 64 billion pounds, in reference to the strong turnout of these certificates.
With the liberalization of the exchange rate of the Egyptian currency - the floating of the pound - and raising the interest rate about three times, the return on the certificate of the Suez Canal is weak compared to some certificates, which came back to about 20%; which led the holders of these certificates to the direction of dispensing with them, In November last year increased the yield down to 15.5%, after increasing customer requests to recover the value of the certificate.
In an attempt to prevent customers from relinquishing these certificates, the Central Bank decided not to allow the customer to recover the certificate one year prior to the purchase, specifying the rate of return if the customer retrieves the value of his certificate in the second year of purchase of the certificate by 7% The original yield of the certificate and 8% if the certificate was recovered during the third year of purchase, down 4% from the original certificate yield, a decision that most of the holders of such certificates were forced to hold until their expiry.
4 Reasons why external borrowing is a distant solution
According to bank estimates, some of the holders of these certificates sold about 4 billion pounds over the past years; to drop the origin of those certificates owed by the state to about 60 billion pounds to be disbursed next year, according to these figures, the idea of ​​borrowing about 5 billion dollars from abroad to repay This amount is exaggerated, as this amount is equivalent to about 89.50 billion pounds, but this is not the only reason to exclude the scenario of borrowing from abroad, there are several other reasons to make payment of these certificates is not a major problem that forces the government to borrow external,
1-jump in channel revenues
The Suez Canal has been hit by a decline in revenues in recent years due to the significant decline in world trade, the ongoing tensions in the region and the decline in oil since mid-2014. This has made the ships take longer routes away from the Suez Canal to provide the high fees As the rise of oil returned ships to the canal, while the Suez Canal Authority during this period to the policy of reducing the fees of traffic from the waterway pivotal for the economy of the country by up to 75% for some ships, They are Si Study already revealed positive results.
These positive results prompted the Suez Canal Authority to announce the channel's revenues for the current fiscal year 2017-2018, which will end by the end of this month - June 30th - before the end of the year unusually. Revenues have reached a record level, Up 11.5 per cent to $ 5.585 billion. This is the highest turnover in the history of the first corridor between the Mediterranean and the Red Sea, with the channel's highest revenue in the fiscal year 2009-2010 at $ 5.5 billion.
The Information and Decision Support Center of the Egyptian Council of Ministers announced that the revenues of the Suez Canal increased by 12.6% year-on-year during the first third of January 2018, while revenues were high in 2017 by 5.4% To $ 5.3 billion in 2017, compared with $ 5 billion in 2016.
Although the profit of the registered channel is lower than the country's forecast for 2015, it is also insufficient to pay the value of the certificates, but under the positive outlook for the next fiscal year will contribute significantly to the country's non-trend of external borrowing. That the targeted revenues from the Suez Canal Authority increase by about 9% in the next fiscal year 2018/2019, compared to the current year.
2 - high bank deposits .. The way of internal borrowing paved
Deposits with the banking system are the most important to the Egyptian government to finance the budget deficit by selling treasury bills to banks that invest deposit funds in the purchase of government bonds and bonds that provide good returns and with an increase in the value of these deposits; The central bank announced in May that the total deposits with the banking system increased, except for the Central Bank of Egypt, which increased by about 65 billion pounds during the month of January.
According to the bank, total deposits at the end of January reached 3.394 trillion pounds, compared to 3.329 trillion in December, while total government deposits rose to 529.3 billion pounds during the first month of this year. Given these figures, To rely on domestic borrowing through the issuance of treasury bills and bills may be a much closer option if the channel's revenues do not cover the value of the certificates.
3 - What were you doing? .. «We were printing money»
In a popular television interview, Egyptian Central Bank Governor Tariq Amer said that the state was relying on printing money to fill the budget deficit, as one of the country's solutions to provide liquidity to the government, which is difficult to exclude in the response of Suez Canal certificates. His country no longer uses this policy to cure its crises.
According to figures issued by the Central Bank of Egypt, the volume of cash issued - printed - rose to 453 billion pounds, in

At the end of June 2017, compared to 369 billion pounds at the end of June 2016, an increase of about 84 billion pounds during the year, ie by the end of the last fiscal year 2016 - 2017, the bank in January 2017 only printed 100 million pounds , And 100 million 50 piasters of the same specifications currently traded with currencies currently traded through banks. 4 - The decline in domestic interest rates and the US interest rate increases the idea that recourse to external borrowing is difficult during this period is the continued rise in the US interest rate, as the Federal Reserve (the Federal Reserve) to raise the basic interest rate by a quarter percentage points to reach the level of Between 1.75% and 2%, for the second time this year after raising the interest rate by 25 basis points for the first time this year at the meeting last March. The bank's expectations are that interest rates will rise four times this year, compared to expectations of a three-fold increase last March, which will raise the cost of external borrowing significantly under the recent rise in the dollar, but in turn the central bank is aiming to cut interest rates. In March 2018, the Bank cut the interest rate on deposits and lending by 1.00%, the second consecutive decline in the Egyptian interest rate on deposits and lending in two months after the first reduction decided by the monetary authorities in February the same percentage. The interest trend generally shows that the cost of external borrowing will be high in the coming months; this makes the government perhaps avoid this option. In addition to the above reasons, the nature of the certificates remains one of the main reasons why its response is unlikely to pose a major dilemma for the government. Bank deposits around their owners to the Suez Canal certificates, and is expected to be converted to other certificates with higher returns at the end of the certificates period, meaning that the liquidity ratio that banks will need to repay the certificates will be much lower than the current total number of certificates