Why Tarek Amer Reappointed As CBE Governor?

President Abdel Fattah El-Sisi issued a decree, appointing Tarek Amer for a second four-year term as the Governor of the Central Bank of Egypt (CBE). 

This decree resolved the controversy that prevailed in the local market during the past weeks regarding the candidates for the position within the Egyptian system.

It was the earliest expectation due to Egypt`s Central Bank's success during Amer first period. He managed a series of key issues, including the shortage of foreign currency and interest rates and initiatives to support the economy.

Exchange rate liberalization system

The Central Bank of Egypt announced on November 3 the launch of the freedom of banks operating in Egypt to pricing foreign exchange through the interbank mechanism.

The decision was an end to the currency crisis that emerged after the January 25 Revolution in 2011. The crisis resulted in a parallel market for the dollar and the disappearance of foreign currency from banks. It disrupted the number of a wide range of companies’ plans for vertical and horizontal expansion.

Analysts see the liberalization of the exchange rate as the real starting point for economic reform. It led to an agreement on a $ 12 billion lending program with the International Monetary Fund. It also helped to restore the currency flows to official channels and ending the black market.

175% increase in foreign reserves:

After the liberalization of the exchange rate, Amer succeeded in refilling Egypt's foreign reserves to rise by about 175% to an amount of $ 45.25 billion by the end of last October compared to about $ 16.4 billion when he took charge in November 2015.

External debt has played a role in building these reserves, but these are seen to be more sustainable. This appeared especially as the country regains its ability to deal with international debt markets and international investors in domestic debt markets.

Egypt has received a loan of $ 12 billion under the extended facility agreement with the IMF, as well as a financing package through bilateral agreements, during the past three years.

Since the liberalization of the exchange rate to the end of the third quarter of last fiscal year, CBE has received $ 150 billion of foreign exchange inflows, of which 88 billion dollars were to banks in two years, according to statements to Amer.

The lowest level of inflation in 14 years

The decision to liberalize the Egyptian pound caused a huge change in asset prices in the local currency. It pushed the inflation rate to 35% after a month of floating before it was besieged by CBE to reach 3.1%, by the end of last October, the lowest level in 14 years.

During Amer`s first term, CBE raised the interest rate to about 10%. It also raised the mandatory reserve ratio approved by banks' savings to 14% from 10% in parallel with some banking procedures directed by banks, especially the state banks NBE and Banque Misr.

It has to control inflation, most notably the issuance of savings certificates with a return of 20%, which contributed in attracting liquidity and restricting purchasing power.

Initiatives to strengthen economic sectors

During Amer`s period, several important initiatives were launched to strengthen the economic sectors affected by the monetary and financial measures associated with the economic reform program.

In December 2015, the CBE Board of Directors issued a unified definition for SMEs and micro banks.

CBE obliged banks in early 2016 to reach 20% of SME loans to their credit portfolios within four years. It 7,5% in an attempt to push about EGP200 billion to the sector.

In February 2016, CBE announced the allocation of EGP 5 billion for the re-lending of SMEs to finance machinery and production equipment for a period of 10 years.

Amer launched an initiative to enhance financial inclusion with the aim of increasing dealers with the banking sector by opening bank accounts without expenses.

The bank issued an initiative to re-establish and renew floating hotels and tourist transport fleets and to provide EGP 5 billion for banks to be repaid at a reduced interest rate of 10%.

Banks were allowed not to list companies with temporary foreign currency facilities among the troubled companies.

CBE included small companies and establishments working in the agricultural, dairy, fodder, fish, and poultry and livestock sectors within the system of projects that are lent by 5% by reducing their work volume to EGP 250 thousand.

During the last two years, CBE steps have been more specific towards moving to a non-cash society.

Recent years have seen serious moves towards the automation of public debt through the launch of a centralized depository system, in cooperation with the European Bank for Reconstruction and Development and the World Bank.