Governor of the Central Bank of Egypt (CBE) Hassan Abdullah praised the role of the state and the private sector in promoting the industrial sector in Egypt. He added that more effort is needed to develop the industrial sector in the country.
During his participation in the session titled “Roadmap for the Development of the Industrial Sector: Challenges and Mechanisms to Stimulate the Sector” within the third day of the Egyptian Economic Conference 2022, Abdullah said that the trade sector is much easier to deal with compared to the industrial sector, which needs greater efforts to advance and develop. He said that he was personally part of a presidential initiative titled “Begin” to consolidate industry and replace imports and employment in the country before his assignment as governor of the CBE.
Gamal Negm, Deputy Governor of the CBE, stressed that the bank spares no effort to support the industry, and is aware of the extent of the problems facing the industrial sector. He stressed that CBE is trying to find radical solutions to the problems of the industrial sector.
During his participation in the conference, Negm pointed to the need to develop industrial capabilities in order to achieve sustainable development in the country, stressing the keen interest of the Central Bank and the banking sector in the industrial sector in Egypt.
He pointed out that there has been a growth in lending rates to the industrial sector in the country during the past three years, which confirms the state’s interest in this sector, stressing that the industrial sector has acquired the bulk of the sectors benefiting from the lending and discount balances provided by the banking system.
Negm explained that in December 2019, an initiative at a cost of EGP 100bn was implemented for medium enterprises only, with an interest rate of 10%, and in March 2020, with the beginning of the Coronavirus pandemic, large companies began to suffer with supply and financing chains. CBE entered large companies within the initiative and reduced interest from 10% to 8% to provide more convenience to manufacturers and not pressure them in terms of interest obligations.
He added that while the goal of the initiative was reached (up to EGP 100bn in July 2020), the government, CBE and the banks did not stop there. Instead, they took it upon themselves to continue this progress until the funding reached EGP 345bn, benefiting about 10,000 customers.
He pointed out that this result was reached through several factors. The lack of clarity of vision increases the possibility of loss in the future, so credit risk guarantee companies started introducing large corporates to their portfolios, which is the opposite of what is happening in all emerging markets where guarantee companies work more with SMEs. They provided guarantees at the time amounting to EGP 182bn.
Negm added that all these factors have a great cost borne by the state and CBE to ensure the continuation of the industry in harsh conditions, including the Corona pandemic and the Russian-Ukrainian war. He noted that the volume of guarantees provided by CBE to companies to help activate the initiative amounted to about 79% of the volume of the initiative.
Gamal Negm explained that price stability and job generation are top priorities for CBE, pointing out that it is more important, as an issue, than the interest rate and its rise.
He pointed out that price stability and the ability to control prices are top responsibilities and more important than the interest rate and its rise for industrialists, adding that CBE has analyzed indicators for about 12 industries.
He added that the cost of the product ranges from 75% to 90% of the sales volume of industrial companies as an indicator, noting that analyses found that the inputs represented from 5% to 7% of sales.
He explained that in the case of inflation, all inputs will affect the prices of products, pointing out that some industries include energy in their production inputs, which makes the impact more severe on them.