On May 10, the Canada Egypt Business Council held its ‘Annual General Meeting’ and special luncheon at the Four Seasons, Nile Plaza Hotel entitled “The Egyptian Financial Policies…a Future Vision” featuring keynote speaker H.E. Dr. Youssef Boutros-Ghali, Egypt’s Minister of Finance and moderated by Mr. Mahmoud A. Latif, Chairman, Bank of Alexandria.

The purpose of the event was to acquaint Egyptian investors, local government officials, and commercial banks with the recent finance and investment programs taking place in Egypt through highlighting the development strategy of the Ministry of Finance and the opportunities for the private sector investment using the public-private partnership model.

Addressing CEBC members and distinguished guests, CEBC Chairman, Mr. Motaz Raslan started his speech with an outline of the latest state of the Egyptian economy in the wake of the current global financial meltdown, adding that Egypt was able to weather the financial storm due to its recent sound financial system. He went on to praise the role of the Ministry of Finance headed by Dr. Ghali in removing many of the obstacles and customs restrictions, which contributed to improving the investment climate to attract more foreign direct investment (FDI) to Egypt.

Praising the Minister’s background, Mr. Raslan briefly delineated the Minister’s professional career path; revealing his success and dedication ever since he was Egypt’s Minister of State for Economic Affairs and then the Minister of Foreign Trade before his appointment as Egypt’s Minister of Finance in 2004. He further added that H.E. Dr. Ghali received the ‘Emerging Markets Award’ for Finance Minister of the Year for the Middle East region twice in 2005 and 2006 as well as being elected as the Chairman of the ‘International Monetary and Financial Committee of IMF’ in 2008.
Raslan then delved in the Minister’s role in endorsing the sense of confidence between taxpayers and the ‘General Tax Authority’. “Such positive relationship, has recently boosted tax revenues with a forecast to reach an amount of 131 billion pounds during the fiscal year 2010 / 2011 compared to an amount of 121 billion for the current fiscal year, and these figures reflect the magnitude of taxes and its role in the raising the state’s budget and developing economic growth”.

Mr. Raslan then gave the floor to Ambassador Ferry de Kerckhove who started his speech by commending the Minister’s commitment towards reforming the Egyptian economy and restructuring its financial sector which he viewed as the main contributor for boosting FDI and reducing the impact of the financial turmoil on the Egyptian economy.

He finally concluded that these reform attempts have placed Egypt as one of the most resilient economies in the Middle East and North Africa in terms of enduring the impacts of the global recession, where progress of the Egyptian ‘Financial Sector Reform Program’ has been internationally praised. “Egypt has been placed on the international map as a serious reformer making the country recently well acknowledged by global partners looking for expanding their cooperation in the region”, asserted the Canadian Ambassador.

During his address, Mr. Mahmoud A. Latif, Chairman, Bank of Alexandria had identified the crucial factors that had facilitated the reform of the financial and banking sector in Egypt, stating that Minister Ghali was one of the major initiators and supporters of the Egypt’s economic progress through contributing in the designing and the implementation of Egypt’s economic reform programs. He added that his Excellency the minister has assisted in implementing a series of reforms that facilitated in modernizing and reinvigorating the Egyptian economy and deepening its global integration. “Chief among these, he explained, is the major income tax and trade reforms, coupled with deregulation and liberalization in key areas of economic activity. This is besides his serious attempts in getting Egypt’s privatization program effective in accordance with international standards.”
H.E. Dr. Youssef Boutros-Ghali then inaugurated his keynote speech with an address that conveyed the current state of financial sector in Egypt explaining that Egypt has recently issued $1.5 billion of 10 and 30 years international bonds, and received a large number of orders that exceeded the notes available. He added that the country raised $1 billion of 30-year dollar-denominated bonds to yield about 6.9 percent, receiving orders worth ten times the value of these notes maturing in 30 years time.

“Egypt also issued a 10-year $500 million at 5.75 percent that received orders worth six times the value of the notes”, the Minister added. Such strong demand, Dr. Ghali asserted, reflects the international markets’ trust in the Egyptian economy. He further explained that the low interest rate and long-term bonds signaled the trust of the international markets and investors in the Egyptian economy, while Greece, an EU member, did not manage to get loans at less than 7.5 percent interest.

The minister went on to outline the three principle reasons for the Greece credit crunch, pointing out, that this crunch is certainly due to lack of investors’ confidence in the Greece economy, despite that Greece is not the first country to suffer a budget deficit of 13 percent and a debt to GDP ratio of 150 percent.

In addition, the Minster signified the importance of maintaining a balance between the budget deficit and the revenue generated through upholding the monetary policy tools, as well as acquiring the confidence of global markets as key elements in boosting financial and economic development of any nation

Moving to the economic progress Egypt has conquered in the past years, Dr. Ghali pointed out that the country achieved an impressive 7.5 percent of growth prior to the global financial crisis, with a total level of investment to surplus $13.6 billion. He further forecasted that Egypt’s economic growth will bounce back to 6 percent within the fiscal year 2010/2011 leading to reducing the state’s budget deficit as well as domestic debt ratio. He optimistically explained that an increase of one percent over a 5 percent growth rate would generate around 250,000-employment opportunity.

Dr. Ghali then attributed the country’s plans to tap international markets for its first Eurobond issuance since 2007, “The government plans to reduce the budget gap to 7.9% of gross domestic product in the next fiscal year starting July, from a projected 8.4% this year”, Dr. Ghali also declared that larger cuts, as advocated by the International Monetary Fund, will have to await a stronger economic recovery. “We are not completely out of the bottle neck yet, our economy has recovered but not fully, so I want to make sure that we are on a self-sustaining momentum before I start really cutting down on the budget deficit”, added the minister.

Furthermore, Dr. Ghali addressed a key factor contributing to gearing the economic growth cycle, which is the new insurance law. The minister further detailed the pension and insurance law, which he mentioned would develop new mechanisms for the management and safe investment of insurance funds. He explained that according to the new law, citizens at the age of 65 and above would receive a pension of LE 100 whether they have subscribed or not to receive it, where all they have to do is, to present a social security ID.

He also added that once the law is approved, 2,700,000 citizens would have their pensions increased as the law triples the pension of those who receive LE 50 to LE 150. In addition, he declared the retirement age will be raised five years to be at the age of 65, and those who retire at that age will receive a pension that totals around 75 to 85 percent of their latest salary amount.

“This Unified Social Insurance and Pensions law, will provide a comprehensive review of the current insurance system, leading to closing the gap between the values of what the citizens pay and the amount they actually receive at pension time.” He finally concluded that once the law is applied, it would greatly contribute to increasing the value of savings, thus creating additional funds for the state to close the current budget deficit.

In the question and answer session that followed, Dr. Boutros-Ghali responded to questions raised by the audience regarding subsidies, the real estate tax law, the impact of inflation on exporters, the budget deficit, and sales tax.