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Egypt Issues the "Belady" Saving Ce

Egypt Issues the "Belady" Saving Certificate for Expatriate Egyptians
On 29 February 2016, both the Minister of Immigration and Expatriate Affairs and Central Bank of Egypt ("CBE") have announced the issuance of the "Belady" certificate for Egyptians abroad, via three national banks (Ahly, Misr and Cairo). The certificate aims at enhancing the contribution of Egyptian expatriates' savings to national income. It is a 100 dollar par value certificate (or its multiples and with no maximum amount), issued for natural persons living outside Egypt whether in their names or the names of their minor children. The interest rate is constant throughout the three offered certificate durations, and is disbursed on a semi-annual basis in US dollars, as follows:
  • 5% for the one-year maturity certificate.
  • 5% for the three-year maturity certificate.
  • 5% for the five-year maturity certificate.
Both the three-year and five-year certificates can be redeemed (in full value and in the same currency of issuance) after the passage of six months and one year respectively since their issuance dates, while the one-year certificate cannot be redeemed except at maturity. The CBE guarantees to certificate owners the right to transfer the redeemed amounts as well as returns to their accounts outside Egypt in dollars, if requested, and with no ceiling to the amount of transfer nor incurring any expenses or bank fees whether on the incoming transfers from abroad or when re-transferring the returns to abroad. The three issuing banks have detailed, via their websites, the procedures by which the certificate can be obtained. [1] This is considered the second issuance of dollar-denominated saving certificates for Egyptians abroad; the first issuance took place in 2012 through the National Bank of Egypt for certificates with 4% interest rates and three-year maturities.[2]
Commentary
The issuance of the "Belady" certificate comes at a critical time, where the Egyptian economy suffers from a huge drain in the liquidity of foreign currency as a result of the deterioration in the main sources relied upon for foreign currency reserves during the past five years. The most important of which includes: foreign capital flight and decreased flow of foreign direct investments (from $13.3 billion in 2007 to $6.4 billion in 2014); the recession in Suez Canal revenues (scoring an average of $5.2 billion); the decline of tourism revenues (from $11.6 billion in 2010 to $7.4 billion in 2014); and the decrease in the value of exports of goods and services (from $23.9 billion in 2010 to $22.1 billion in 2014). [3] As for remittances of Egyptians abroad, which are relied upon as a main source of foreign currency and as external support for local investments, they have been estimated at $19.3 billion in 2014 up from $18.5 billion in 2013. [4] However, preliminary CBE data for 2015 show a decline in the amount of such remittances during the period from January to September 2015 by around $700 million (compared to the same period in 2014). This could be attributed to oil price decreases in the key countries where Egyptians abroad work. It is noteworthy in this context that a big amount of remittances is still transferred outside the official banking channels, since only 13.7% of Egyptians own bank accounts according to 2014 data.[5] It is expected that the "Belady" certificate would stimulate the transfer of Egyptian expatriate savings to Egypt, as well as stimulate the transfer of dollars into the country through official channels. This could be attributed to the many advantages the said certificate enjoys; the most important of which are: its guarantee by the CBE (protecting it from foreign currency fluctuations and default risks); its diverse maturities; its redemption ability with full value; its exemption from banking fees upon transfer; and its relatively high return (as compared to other international certificates).[6] Moreover, the issuance of the certificate could be considered a good forward-looking move ahead of the decision expected by the US Federal Reserve to raise interest rates, which could result in the transfer of Egyptian expatriate saving surpluses to US banks at the expense of Egyptian banks. However, this measure is not sufficient on its own to enhance the dollar revenues that are suffering from severe shortages as per the reasons highlighted above. The certificate's high return reflects nothing but a high risk rate estimated for the Egyptian economy as a whole (the relationship between return and risk rates is positive). Consequently, the many measures undertaken by both the government and banking sector to overcome dollar shortages (such as the issuance of "Belady" certificate) must be complemented by a root cure for the crisis, so as to ensure the enhancement of the more sustainable dollar sources. In particular, the government must work on attracting foreign direct investments (through setting a clear and definite strategy for investment climate enhancement); supporting the tourism sector (through fast and serious interventions with non- conventional tools and measures); undergoing structural reforms to the local manufacturing sector especially exporting industries (through re-opening the factories that have shut-down, setting a Unified Industry Law, and facilitating licensing and land acquisition procedures). [1] The Misr Bank website available through this link; the Cairo Bank website available through this link; and the NBE website available through this link. [2] Revenue from such certificates was estimated at around $400 million. [3] Ministry of Finance, Financial Monthly Bulletin, January 2016, available through this link. [4] CAPMAS, Egypt in Numbers, March 2016, available through this link. [5] "The 2015 The Little Data Book on Financial Inclusion", The World Bank, available through this link. [6] Return on similar certificates in other countries, such as the USA, reaches 0.5%.
On 29 February 2016, both the Minister of Immigration and Expatriate Affairs and Central Bank of Egypt ("CBE") have announced the issuance of the "Belady" certificate for Egyptians abroad, via three national banks (Ahly, Misr and Cairo). The certificate aims at enhancing the contribution of Egyptian expatriates' savings to national income. It is a 100 dollar par value certificate (or its multiples and with no maximum amount), issued for natural persons living outside Egypt whether in their names or the names of their minor children. The interest rate is constant throughout the three offered certificate durations, and is disbursed on a semi-annual basis in US dollars, as follows:
  • 5% for the one-year maturity certificate.
  • 5% for the three-year maturity certificate.
  • 5% for the five-year maturity certificate.
Both the three-year and five-year certificates can be redeemed (in full value and in the same currency of issuance) after the passage of six months and one year respectively since their issuance dates, while the one-year certificate cannot be redeemed except at maturity. The CBE guarantees to certificate owners the right to transfer the redeemed amounts as well as returns to their accounts outside Egypt in dollars, if requested, and with no ceiling to the amount of transfer nor incurring any expenses or bank fees whether on the incoming transfers from abroad or when re-transferring the returns to abroad. The three issuing banks have detailed, via their websites, the procedures by which the certificate can be obtained. [1] This is considered the second issuance of dollar-denominated saving certificates for Egyptians abroad; the first issuance took place in 2012 through the National Bank of Egypt for certificates with 4% interest rates and three-year maturities.[2]
Commentary
The issuance of the "Belady" certificate comes at a critical time, where the Egyptian economy suffers from a huge drain in the liquidity of foreign currency as a result of the deterioration in the main sources relied upon for foreign currency reserves during the past five years. The most important of which includes: foreign capital flight and decreased flow of foreign direct investments (from $13.3 billion in 2007 to $6.4 billion in 2014); the recession in Suez Canal revenues (scoring an average of $5.2 billion); the decline of tourism revenues (from $11.6 billion in 2010 to $7.4 billion in 2014); and the decrease in the value of exports of goods and services (from $23.9 billion in 2010 to $22.1 billion in 2014). [3] As for remittances of Egyptians abroad, which are relied upon as a main source of foreign currency and as external support for local investments, they have been estimated at $19.3 billion in 2014 up from $18.5 billion in 2013. [4] However, preliminary CBE data for 2015 show a decline in the amount of such remittances during the period from January to September 2015 by around $700 million (compared to the same period in 2014). This could be attributed to oil price decreases in the key countries where Egyptians abroad work. It is noteworthy in this context that a big amount of remittances is still transferred outside the official banking channels, since only 13.7% of Egyptians own bank accounts according to 2014 data.[5] It is expected that the "Belady" certificate would stimulate the transfer of Egyptian expatriate savings to Egypt, as well as stimulate the transfer of dollars into the country through official channels. This could be attributed to the many advantages the said certificate enjoys; the most important of which are: its guarantee by the CBE (protecting it from foreign currency fluctuations and default risks); its diverse maturities; its redemption ability with full value; its exemption from banking fees upon transfer; and its relatively high return (as compared to other international certificates).[6] Moreover, the issuance of the certificate could be considered a good forward-looking move ahead of the decision expected by the US Federal Reserve to raise interest rates, which could result in the transfer of Egyptian expatriate saving surpluses to US banks at the expense of Egyptian banks. However, this measure is not sufficient on its own to enhance the dollar revenues that are suffering from severe shortages as per the reasons highlighted above. The certificate's high return reflects nothing but a high risk rate estimated for the Egyptian economy as a whole (the relationship between return and risk rates is positive). Consequently, the many measures undertaken by both the government and banking sector to overcome dollar shortages (such as the issuance of "Belady" certificate) must be complemented by a root cure for the crisis, so as to ensure the enhancement of the more sustainable dollar sources. In particular, the government must work on attracting foreign direct investments (through setting a clear and definite strategy for investment climate enhancement); supporting the tourism sector (through fast and serious interventions with non- conventional tools and measures); undergoing structural reforms to the local manufacturing sector especially exporting industries (through re-opening the factories that have shut-down, setting a Unified Industry Law, and facilitating licensing and land acquisition procedures). [1] The Misr Bank website available through this link; the Cairo Bank website available through this link; and the NBE website available through this link. [2] Revenue from such certificates was estimated at around $400 million. [3] Ministry of Finance, Financial Monthly Bulletin, January 2016, available through this link. [4] CAPMAS, Egypt in Numbers, March 2016, available through this link. [5] "The 2015 The Little Data Book on Financial Inclusion", The World Bank, available through this link. [6] Return on similar certificates in other countries, such as the USA, reaches 0.5%.