Tarek Amer, chairman of National Bank of Egypt, comments on the changing political and economic environment in the North African country one year after a popular uprising ended the 30-year rule of Hosni Mubarak.
Government-owned National Bank of Egypt is the country’s biggest lender, controlling 24 percent of total banking assets. Amer, a former board member of the Central Bank of Egypt, spoke in an interview in Cairo yesterday.
On the elected parliament:
“Investors want to see stable organizations and clear policies.
We’ve seen dramatic change when we’ve established clear and solid policies so people can read the future behavior of institutions and policy makers.
I was personally very happy to see the parliament meeting yesterday.
It’s a very important step in Egypt’s future and Egypt’s economic development, because as a person that’s responsible for business within the economy, we’ve always felt the hindrances because of the political system.”
On the 50 percent drop in Egypt’s international reserves in the past year and the decline in economic growth:
“I’m not concerned about the reserves. The purpose of the reserves is to service difficult periods like this.
Once we have the government in place and it’s very clear what kind of economic policies it’s advocating, everything can be restored very quickly. Tourism, I don’t think will take more than three to four months before you start getting to previous levels.
Today, Egypt continues to feed and spend and consume as it was before the revolution. We are importing every year for $51 billion.
In Egypt, amidst all this revolution and change, there was no loss of confidence in the economy. Egyptians increased their transfers from abroad by 23 percent to reach $13 billion. Egyptians left their funds at banks and bank deposits grew. Imports continued at the same level and exports increased.”
On liquidity levels at local banks and the growing budget deficit:
“This is one of our weaknesses now in the economy, the budget deficit, and it has to be addressed.
Today the banks have a big stock of treasury bills. But banks raise the money through repo-ing the treasury bills at the central bank. Our loan-to-deposit ratio is around 55 percent to 60 percent.
Egyptian banks are very liquid in local currency and in foreign currency.
Of course the cost of borrowing increased because of the government deficit and their stock of that increase. Now this is the challenge of the government, how they’re going to deal with this deficit.
The new government should take advantage of the revolution to finally implement policies that might not seem popular but are in the interest of the economy.
We always said we cannot do far-fetched economic reform without political reform because unpopular governments cannot take the hard decisions just to keep people quiet. I hope our new government today doesn’t adopt the same ways.”
On the weakening Egyptian pound:
“We’ve tested the management of monetary policy at the central bank for the last nine years. And in many situations, they’ve proven very good.
‘‘I’m not concerned about what’s going to happen with foreign exchange.”