The Financial Stability Report for 2020, issued by the Central Bank of Egypt on Monday, showed the success of the Egyptian financial system in containing the repercussions of the coronavirus pandemic.
The economy seems to continue to achieve positive growth rates during the fiscal year (2020/2021), despite the world’s exposure to an economic downturn during 2020 brought on by the pandemic.
The CBE’s report explained that this came about thanks to the flexibility and diversity of the Egyptian economy, and the effective proactive measures and policies taken to confront the repercussions of coronavirus pandemic, supported by the gains of the economic reform program.
Although the pandemic caused a high level of uncertainty among foreign investors, which led to a decline in net foreign flows to emerging markets during 2020, the report noted that components of the Egyptian economy – in addition to the banking sector enjoying high levels of liquidity in both local and foreign currencies – contributed to containing the sudden exit of investment portfolios from the local treasury bills market during the first half of 2020.
While the second half of 2020 witnessed the beginning of the return of foreign investors, which continued during the first half of 2021, their share of the total balances of treasury bills in local currency – in June – exceeded the pre-pandemic level.
The net international reserves also played a primary role in repelling the first consequences of the pandemic, and remained in the sufficient range relative to short-term foreign currency obligations.
These components have enabled the stability of the exchange rate, the low market risks to the banking sector, and the absence of systemic risks resulting from fluctuations in foreign capital.
The report revealed the success of the Central Bank of Egypt in enhancing the credit environment, supported by a package of economic and precautionary policies, and the launch of many initiatives that are commensurate with the nature of each economic activity separately, without excessive risk.
An increase in the financial stability index in June 2021, recording 0.51 compared to 0.49 in June 2020, as a result of the rise in macroeconomic indicators was also noted; with the banking sector continuing to achieve a high level of stability.