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A financial stability report issued by the Central Bank of Egypt revealed the continued resilience of Egypt’s financial system—both banking and non-banking sectors—in performing its core function of financial intermediation throughout fiscal year 2023 and into the first quarter of 2024. This includes providing essential financing to various sectors, offering diverse financial products, and relying on stable household deposits as a key funding source.

The report highlighted Egypt’s ongoing economic growth, with real GDP rising by 2.4% from July 2023 to March 2024, compared to 4.1% during the same period the previous year. This occurred despite global challenges such as escalating regional geopolitical tensions, persistent inflation, and high interest rates.

According to the report, banking sector assets represented 116.9% of nominal GDP and 92.3% of total financial system assets by the end of fiscal year 2023. The sector maintained strong financial health indicators through March 2024, consistently exceeding the regulatory thresholds set by the CBE and Basel Committee requirements, reinforcing trust among market participants.

The report also noted the sector’s ongoing role in foreign currency intermediation and the financing of foreign trade. In line with the structural reforms of the IMF-backed economic program, the adoption of a flexible exchange rate system and an improved economic outlook contributed to increased foreign investment inflows and a balance of payments surplus between January and March 2024. Additionally, net foreign assets in the banking sector improved, foreign currency liquidity increased, and net international reserves grew, continuing to cover short-term external debt.

The banking sector also provided essential financing to both businesses and households without excessive risk-taking, reducing the likelihood of systemic risks from borrower defaults. This success is attributed to the CBE’s enhancement of the credit environment and the continued coordination between fiscal, monetary, and macroprudential policies to maintain economic and financial stability. Fiscal policy focused on fiscal consolidation, while monetary policy remained restrictive to curb inflation by raising interest rates. Additionally, the mandatory local currency reserve ratio at the CBE stayed at 18%.

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