2

Egypt
Sara Mohamed Ibrahim Zahireldien

I. Introduction
I.1 Background
Egypt is one of the cradles of civilization in the Middle East. Traces of early man were found in Egypt
dating back as early as 700,000 years ago Ancient Egyptians used a phonetic-pictograph writing called
hieroglyphics by the Ancient Greeks. Ancient Egypt boasted considerable achievements in art, medicine,
astronomy and literature, and was the hub of civilization in much of the Near East and North Africa.
Egypt is the gift of the Nile, meaning that it flourished on the top soil that was formed from silt broughtby the recurrent floods of the Nile. A unified last kingdom arose circa 3200 B.C, and a series of dynasties
ruled in Egypt for the next millennia. The native dynasty fell to Persians in 341 B.C., who were replacedby the Greeks, Romans, and Byzantines. It was the Arabs who introduced Islam and the Arabic
Language in the 7 Century and who ruled for the next six centuries. A local military caste Mamluks took
control about 1250 and continued to govern after the conquest of Egypt by the Ottoman Turks in 1517.
Completion of the Suez Canal in 1869 elevated Egypt as an important World transportation hub which
is a portion of the sea linking the Mediterranean Sea and the Indian Ocean. To protect its investment,
Britain seized control of Egypt’s government in 1882, but nominal allegiance to the Ottoman Empire
Continued until 1914. Partially independent from the UK in 1922, Egypt acquired full sovereignty fromBritain in 1952. The country is formally known as the Arab Republic of Egypt and locally known as theJumhuriyat Misr al-Arabiyah or just Misr.
I.2 Geography and Population
Location: Egypt is an African and Arabian country, located in a very unique location in North Africa
and West Asia (Sinai Peninsula). Egypt bordered from the north by the Mediterranean Sea that separates
it from Europe, from the east by Palestine, Red Sea and Gulf of Aqaba which separate Egypt from Jordan
and Saudi Arabia, from the south by Sudan and from the west by Libya. The capital is Cairo. Area
1,002,000 square Km. Land 995.450sq Km and water 6.049 Km.
The Climate of Egypt: The weather in Egypt is usually hot, dry and sunny all year long especiallyduring the summer as the temperature could reach 40 C (104 F) but in the winter months from September
to April the climate is quite wonderful with low temperatures. The winter months are known to be thebest time for tourists to visit Egypt as the climate becomes quite tolerable which create the best
atmosphere for checking the various artifacts and monuments of the magical land.
Religions: Approximately 94.9% of the population of Egypt is Muslim. The majority of these
individuals follow Sunni Islam. Egypt is home to Al-Azhar University, the most important and oldest
university of Islamic studies in the world. Islamic beliefs and practices shape all levels of Egyptian
society and government. The Christian religion is thought to be represented by 5.1% of the population.
The vast majority, 95%, of Christians in Egypt belong to the Coptic Orthodox
Population: the current population of Egypt is 101,401,107(as August 21,2019) population growthrate average 1.8%. Egypt population is equivalent to 1.31% of the total world population. Egypt is themost populous country in North Africa, the Middle East, and the Arab world, the third-most populous
in Africa (after Nigeria and Ethiopia), and the fifteenth-most populous in the world. The great majorityof its people live near the banks of the Nile River, an area of about 40,000 square km (15,000 sq mi),where the only arable land is found. The large regions of the Sahara desert, which constitute most of
Egypt's territory, are sparsely inhabited. About half of Egypt's residents live in urban areas, with most
spread across the densely populated centers of greater Cairo, Alexandria and other major cities in the87Nile Delta. official language is Arabic language, English and French widely understood by educatedclass.
I.3 Political structure:
Egypt's government is based on the principle of republicanism, and it has a semi-presidential system ofgovernment with a unicameral legislature. The legal system is based on Islamic and civil law(particularly Napoleonic codes); and judicial review by a Supreme Court, which accepts compulsory
International Court of Justice jurisdiction only with reservations. Islamic jurisprudence is the principal
source of legislation. Sharia courts and qadis are run and licensed by the Ministry of Justice. The
personal status law that regulates matters such as marriage, divorce and child custody is governed by
Sharia. In a family court, a woman's testimony is worth half of a man's testimony.
In 2011, the army deposed longtime President Hosni Mubarak amid the Arab Spring protests. The
ensuing political instability led to the election of a new parliament and president, recurring street
demonstrations, and an army coup that ousted Mubarak’s unpopular successor, Mohamed Morsi of the
Muslim Brotherhood’s Freedom and Justice Party. On 26 December 2012, the Muslim Brotherhood
attempted to institutionalize a controversial new constitution. It was approved by the public in areferendum held on December 2012 with 64% support, but with only 33% electorate participation. It
replaced the 2011 Provisional Constitution of Egypt, adopted following the revolution.
On 18 January 2014, the interim government successfully institutionalized a more secularconstitution The president is elected to a four-year term and may serve 2 terms. The parliament may
impeach the president Under the constitution, there is a guarantee of gender equality and absolute
freedom of thought. The military retains the ability to appoint the national Minister of Defense for the
next two full presidential terms since the constitution took effect. Under the constitution, political parties
may not be based on "religion, race, gender or geography"
The Constitution of Egypt: The country had several constitutions over the years even when it
was a monarchy state prior to 1952. The first one was in 1923 after the country’s independence. In
2011 the 1971 constitution was suspended following the civilian revolution. In 2012 anotherconstitution was approved through a referendum, but was suspended in a military coup in 2013 anda new constitution was approved by voters in 2014.
Executive Branch of the Government of Egypt: The chief of state is the president who is voted bya majority vote (in a second round if the need arises) for a four-year office term and is entitled to asecond term if re-elected. The last voting in Egypt was conducted in May 2014, and Abdelfattah Said
Elisi was elected, and he is the current president. The next election will be held in May 2018. The
premier is the head of government and receives the appointment from the president and must be
approved by the legislature.
Legislature of The Government of Egypt: Egypt has a unicameral parliamentary system that is theHouse of Representatives also known as the Majlis Al-Nowaab that has 596 seats out of which 448 aredirectly elected, 120 members apportioned to the women, youth, and Christians, and 28 members
selected by the president. The Parliamentary election is multiphase.
Judicial Branch of The Government of Egypt: The highest court in the country is the Supreme
Constitutional Court (SSC) consisting of the court’s president and other ten justices. The Supreme
Constitutional Court is the last court of arbitration on the constitutionality of country’s laws and otherconflicts between the lower courts on matters concerning rulings and jurisdiction. The Supreme
Administrative Court is the highest court of the state council. According to the 2014 constitution, all thejudges and justices are selected by the Supreme Judiciary Council and the appointment is done by thepresident. Judges are appointed for life. There are other subordinate courts in the country which include
the courts of Appeal, Courts of the First instance, courts of limited jurisdiction, and family courts thatwere established in 2004.
I.4 Education:
Egypt has made significant progress in a number of crucial areas in recent years—its official youth
literacy rate, for instance, increased from 85 percent in 2005 to 94 percent in 2017, while the number of88elementary-age out-of-school children has dropped by 50 percent over the past five years after
skyrocketing during the revolution in 2011, per data from UNESCO Institute of Statistics (UIS).
But needless to say, Egypt’s population growth places enormous strains on the country’s education
system. The total number of children enrolled in elementary school jumped from 9.5 million in 2005 to
12.2 million in 2017, and from 6.7 million in 2009 to 8.9 million in 2015 at the secondary level, resulting
in greater funding requirements, capacity shortages, and overcrowded classrooms. The pupil-to-teacher
ratio has slightly increased in both elementary and secondary education in recent years, while teacher
salaries are falling. Parents have to spend more of their income on private tutoring and other educationrelated expenses. There’s also a substantial amount of “disguised illiteracy,” that is, some 30 percent ofschoolchildren are estimated to “lack basic skills for reading and writing.” Most of them live in rural
regions.
I.5 Health
The Egyptian health care system faces multiple challenges in improving and ensuring the health andwellbeing of the Egyptian people. The system faces not only the burden of combating illnesses
associated with poverty and lack of education, but it must also respond to emerging diseases andillnesses associated with modern, urban lifestyle. Emerging access to global communications andcommerce is raising the expectations of the population for more and better care and for advanced healthcare technology.
A high birth rate combined with a longer life expectancy is increasing the population pressure on the
Egyptian health system. By the year 2020 it is estimated that the population of Egypt will have grown
to about 92 million people.
Health Sector Reform Strategy: The government of Egypt has articulated as its long-term goal theachievement of universal coverage of basic health services for all of its citizens. It has also stated theimportance of targeting the most vulnerable population groups as its priority. Major components of thestrategy include:
Expanding the social health insurance coverage from 47 percent (in 2003) of the population to
universal coverage based on the “family” as the basic unit. An affordable and cost-effective packageof basic health services based on the priority health needs of the population will be provided.

Reorganizing services so that they are provided through a holistic family health approach. Provisionof the basic package will be based on competition and choice among the different public and private
service providers, under a single Public and Health Insurance Fund (PHIF) using incentive-based
and other provider payment mechanisms.
Strengthening management systems and developing a regulatory framework and institutional
relationships to ensure quality of care and to support the reform of the health sector.

Developing the domestic pharmaceutical industry and reducing government involvement in the
production of pharmaceuticals while strengthening its role as a financier.

89II. Overview of macroeconomic activity and fiscal condition
Since the mid-2000s, the Egyptian economy has faced repercussion of socioeconomic and politicalchanges that took place in both international and domestic sides. The global financial crisis disrupted
the Egyptian Economy leading to slow down in economic growth. In 2009, real GDP growth started to
decline reaching 1.8 percent in the aftermath of the 2011 revolution. Foreign reserve fell about 50
percent within the period December 2010-December 2011, reaching US $ 15.5 bn in 2012. The
average CPI inflation was about 10 percent during 2005-2008, reaching a peak of 23 percent in August
2008.
For a long time, the country has suffered from low growth rate, high unemployment, increasing un
equality, and deteriorating of living and economic condition which lead to the revolution in the early
2011. In 2014, Egypt adopted a new constitution and elected a new president. The government adopted
plan for enhancing the structural reform, promote investments, create jobs and increase tax revenues by
fiscal adjustments. The government continues to work steadily on achieving sound public finances andmacroeconomic stability in order to provide the foundation on which sustainable growth will be built.
Prudent fiscal and monetary policies constitute the core of the medium-term reform program and are
geared toward correcting the country’s large fiscal and current account deficits, dampening inflationarypressures and reassuring stakeholders that financing gaps are manageable. This policy framework will
preserve confidence and encourage economic actors to expand investment activities and consequently
consumption, thereby propelling growth.
To ensure that growth is sustainable, inclusive and high quality (i.e., investment-led), themacroeconomic policies are being complemented by measures to modernize the business environment,a large hike in public spending on human capital formation, a focus on revamping and expanding
physical infrastructure both in Cairo as well as throughout the country, and a big-picture push to develop
and launch several megaprojects over time.
By design, the government’s medium-term strategy is ambitious and comprehensive. It requires arange of mutually reinforcing and well-designed policy interventions to remove existing distortions andcreate a strong new economic platform. The five-year plan (fy14/15 – fy18/19) will deliver the following
broad targets:Sustainable real GDP growth reaching at least 6% by the end of the period
A faster job creation in order to bring the unemployment rate below 10% and in particular to address
the high rate of youth unemployment.
efficient government spending in parallel with a planned reduction of the fiscal deficit to 8 - 8.5%
of GDP, and the government debt to within a range of 80 - 85% of GDP.

Headline Inflation within a 6 - 8% range.
Higher rates of domestic investment.

Improved export performance.

The development of the country’s human resources supported by increased spending on health,education and Research and Development (up to at least 10% of GDP) as mandated by theConstitution.
Enhanced productivity on the national level and continued investment in and upgrading of
infrastructure.
The government successfully implemented the first wave of macro-economic and structural reforms
that helped to stabilize the economy, sustain growth and improve the participation of the private sector
in the economy. In FY 2019 (ending June 30th, 2019), the GDP reached 5.6 percent, up from 5.3 percent
in FY 2018. The pickup driven by the net exports. Private and foreign direct investment are picking up.
The gas extractives, tourism, wholesale and retail trade, real state and construction have been the main
drivers for growth. The monetary easing was triggered by the remarkable decline in the inflation in
August 2019 to 7.5 percent. The unemployment decreased to 7.5 percent in the fourth quarter of FY
2019 from 9.9 percent a year earlier. This come due to the policies applied to contain energy subsidies
and civil servants’ wages, in addition to increase the revenue collection (from the VAT and income tax).
However, significant risk remains in terms of debt size, the government debt is estimated to havedecreased to 90.5 percent of GDP in end- June 2019, from 97.3 percent of GDP in end-June 2018. The
Egyptian pound strengthen against the US $, reaching EGP/US$16.4 by med September 2019. While90

macroeconomic environment has improved, social conditions remain difficult. Between 2016 and 2018,
nominal wage growth fell below inflation. In addition, the share of population living below the national
poverty line in FY 2018 increased to 32.5 percent, from 27.8 in 2015. To alleviate the adverse effect of
the economic reform on the poor, the government has to adopt social protection mitigation measure andincrease investment in Egypt’s human capital.
II.1 International Environment
II.1.1 Trade balance and Current AccountEgypt has been started program to reform trade balance by carrying out new regulation to liberate foreign
trade with international society, applying unified exchange rate system and floating exchange rate as in2016, the CBE adopted floating exchange rate system that reflects the supply and demand which led togreater transparency and foreign exchange liquidity. More than, the country adopted other policies suchas cut taxes, reduce subsides, privatization of public sectors and liberalized trade and investment.
Examples of, the industries that held widely by the private sector, are construction, non-financial
services agriculture, domestic wholesale and retail trade.
Egypt’s BOP ran an overall surplus of US$ 12.8 billion during FY 2017/18 (compared to US$ 13.7
billion in the previous FY). Below is a review of the main developments, during the reporting year, that
affected the performance of the BOP and reflected the continued favorable effects of the decision of
exchange rate liberalization. The volume of reserves covers nine months of imports. The export has
increased of 40% and the remittance from expatriates increased to $26.4 billion. More than the politicalstability was reflected on the tourism sector revenue from Suez Canal hiked 15 percent. The economy
started to change from depending on raw materials and natural resources to an economy focusing on
deepening economic industrialization and human capital. As 5.3 percent growth comes from increased
investment and net foreign trade, which is reflected in more job opportunities.
The current account deficit declined by 58.6 percent to just US$ 6.0 billion (compared to US$ 14.4
billion). The improved performance came as a result of the following developments:
The trade deficit stabilized at US$ 37.3 billion due to the increase in both export proceeds and import
payments by US$ 4.1 billion each.
The services surplus surged by 98.1 percent to US$1 1.1 billion) against US$ 5.6 billion), mainly
because the travel balance ran a surplus of US$ 7.4 billion (compared to US$ 1.6 billion), and Suez
Canal receipts increased by 15.4 percent to US$ 5.7 billion (compared to US$ 4.9 billion).
Net unrequited current transfers rose by 21.2 percent to US$ 26.5 billion (against US$ 21.8 billion),
due mainly to the rise in remittances from Egyptians working abroad by US$ 4.6 billion.
Investment income balance recorded a deficit of US$ 6.3 billion, mainly as its payments registered
US$ 7.1 billion and its receipts posted only US$ 835.4 million. During the reporting year, the capitaland financial account recorded a net inflow of US$ 22.0 billion (compared to US$ 31.0 billion), due tothe following developments:

FDI in Egypt recorded a net inflow of US$ 7.7 billion (against US$ 7.9 billion). Portfolio
investment in Egypt fell, recording US$ 12.1 billion (against US$ 16.0 billion).
Long- and medium-term loans and facilities achieved a net disbursement of US$ 7.9 billion(compared to US$ 8.0 billion).

The net change in the liabilities of the CBE to the external world shifted to a net repayment of
US$ 3.9 billion in the reporting year (from a net disbursement of US$ 8.1 billion), causing as sucha decline in the liabilities of the CBE to the external world.
The chart below shows the development in Egypt’s BOP main components, on quarterly basis during
FY 2016/2017 and 2017/2018.

91

Figure1: Egypt’s BOP main components during FY 2016/2017 and 2017/2018
US $ bn

Source: Central Bank of Egypt

The following table displays the balance of payment: current account including trade and service account,transfer, capital and financial account during the period 2015/2016 to 2018/2019.
Table 1: Balance of Payments during FY 2015/2016 to 2018/2019
Item
Trade Balance
Export proceeds **Petroleum exports
Other exports
Import payments**
Petroleum imports
Other imports
Services Balance
Receipts
Transportation
Of which: Suez Canal dues
Travel (tourism revenues)
Government receipts
OthersPayments
Transportation
TravelGovernment expenditures
OthersInvestment Income Balance
Receipts
Payments
Of which: Interest paid
Current Transfers
Private (net),
Of which: Remittances of Egyptians working
abroad (1)Official (net)
Balance of Current Account
Capital & Financial Account
Capital AccountFinancial AccountDirect investment abroad
Direct investment in Egypt (net)
Portfolio investment abroad
Portfolio investment in Egypt (Net)Of which: Bonds
Other Investments (Net)Net Borrowing
Medium- and Long-Term Loans
Disbursements
Repayments
Medium- and Long-Term Suppliers' Credit
Disbursements
Repayments

2015/2016-38683.1
18704.6
5674.313030.3-57387.7-9293.6-48094.1
6533.016079.3
9534.65121.63767.5378.0
2399.29546.31339.14091.0777.13339.1-4471.7
396.9
4868.6752.016790.7
16689.2
17077.4

2016/2017-37274.821728.2
6589.515138.7-59003.0-12015.5-46987.5
5614.215400.1
7911.24945.34379.7776.4
2332.89785.91332.12739.91124.14589.8-4568.5
497.9
5066.41231.921835.1
21686.1
21816.3

2017/2018-37276.0
25827.08773.017054.0-63103.0-12489.8-50613.2
11122.4
21486.98707.95706.79804.3636.7
2338.010364.5
1480.22451.51493.54939.3-6279.6
835.4
7115.01616.1
26470.926264.7
26392.9

101.5-19831.121176.7-141.421318.1-164.26932.6
192.1-1286.8-1444.815644.4
7102.7-186.32523.4-2709.7
1505.31560.7-55.4

149.0-14394.0
31015.1-113.331128.4-175.17932.8208.415985.3
5491.57177.09699.25156.87641.1-2484.3
2795.12912.2-117.1206.2-5962.3
21996.5-150.722147.2-271.27719.5-20.8
12094.8
5293.22624.910278.8
6738.58846.4-2107.91118.51313.6-195.1

92(Million US$)2018/2019-38034.428495.011557.016938.0-66529.4-11548.9-54980.513036.524423.6
8600.35730.712570.6
718.8
2533.911387.1
1792.42902.9692.45999.4-8309.8
1014.19323.92574.125113.6
24763.1
25150.8350.5-8194.1
8523.5-129.28652.7-374.05902.9-96.4
4230.15094.2-1009.96253.43333.75525.2-2191.5
828.8
1160.8-332.05783.7-3476.9-104.42092.1-5464.6
12018.6
5857.76160.9-4158.6-2813.0

S.T. Suppliers’ Credit (Net)
Other Assets
CBE
Banks
OthersOther Liabilities
CBE
Banks
Net Errors & Omissions
Overall Balance
Source: Central Bank of Egypt

1747.3-12095.7-27.5-9462.5-2605.7
9573.58128.61444.9-2903.9
13717.2

2421.8-4511.9-116.42161.7-6557.2-3142.0-3879.2
737.2-3246.5
12787.7

2090.9-8881.6-23.4-1764.7-7093.5
1618.31537.880.5-431.9-102.5

The following table shows the BOP main indicators according to GDP during the period 2015/2016 to
2018/2019.
Table2: BOP main indicators according to GDP during the period 2015/2016 to 2018/2019.
item
Change in CBE Reserve Assets (Increase -)Indicators (%)
Merchandise Exports / Imports
Service Receipts / Service Payments
Current Receipts / Current Payments
Trade Balance / GDP
Current Account / GDP
Overall Balance / GDP
FDI in Egypt (net) / GDP
Source: Central Bank of Egypt

2015/2016
2813.02016/2017-13717.2

2017/2018-12787.7

2018/2019
102.5

32.6
168.4
72.4
-11.5
-5.9
-0.8
2.1

36.8
157.4
80.5
-15.9
-6.1
5.8
3.4

40.9
207.3
92.6
-14.9
-2.4
5.1
3.1

42.8
214.5
90.6
-12.6
-2.7
-0.03
2.0

The following table shows the BOP main indicators according to GDP estimates and a detailed reviewof the developments in the BOP components during FY 2016/2017 and 2017/2018
Table3: BOP main indicators according to GDP estimates during FY 2016/17 and 2017/18.
Fiscal Year (%)

Item
2016/17*
Trade Balance- Merchandise exports / GDP
Oil exports / Total exports
Crude oil exports /Oil exports- Merchandise imports / GDP
Non-oil imports / Total imports
Foodstuffs & cereal imports / Non-oil imports
Oil products imports / Total imports- Volume of foreign trade / GDP- Coverage ratio of merchandise exports / Merchandise imports- Trade balance / GDP
Services Balance- Services balance /GDP
- Total services receipts / GDP, of which:Suez Canal receipts / GDP
Tourism/GDP
Transfers: transfers / GDP- Remittances of Egyptians working abroad / GDP- Current account / GDP- Current receipts / GDP- Current payments / GDP- Current receipts / current payments
Capital and Financial Account Net FDI in
Egypt / GDP
Overall Balance / GDP
Months of merchandise and service imports covered by NIRs
Source: Central Bank of Egypt

2017/18*

9.3
30.3
58.8
25.1
79.6
22.6
17.1
34.4
36.8
(15.9)

10.3
34.0
52.4
25.2
80.2
21.7
15.8
35.5
40.9
(14.9)

2.4
6.6
2.1
1.9
9.3
9.3
(6.1)
25.3
31.4
80.5

4.4
8.6
2.3
3.9
10.6
10.5
(2.4)
29.8
32.2
92.6

3.4
5.8
5.5

3.1
5.1
7.2

II.1.2 Current AccountThe decreased in the current account by 58.6 percent was mainly due the rise in both services’ surplus
by 98.1 percent, net unrequited current transfers by 21.2 percent, and the trade deficit stabilized at
US$ 37.3 billion. Such an improvement was restrained by the rise in investment income deficit by 37.5

93

percent. The figure below illustrates the development of (surplus/ deficit) balance of payment during
the FY 2013/2014 to FY 2017/2018
Figure 2: The development of (surplus/ deficit) balance of payment during the FY 2013/2014 toFY 2017/2018

Source: Central bank of Egypt

II.1.3 Trade Balance
Trade deficit remained unchanged at US$ 37.3 billion, as export proceeds grew by 18.9 percent, andimport payments by 6.9 percent. This can be seen as follows:
II.1.3.1Export proceeds
Merchandise export proceeds (oil and non-oil) grew by 18.9 percent to US$ 25.8 billion during the year
under review. This was mainly due to the rise in both oil exports by US$ 2.2 billion and non-oil exports
by US$ 1.9 billion.
Oil Export Proceeds: In FY 2017/2018, oil export proceeds scaled up by 33.1 percent to US$ 8.8
billion. This was owed to the increase in exports of both oil products by US$ 1.5 billion to US$ 4.2
billion (due to the rise in exported quantities), and crude oil by US$ 724.8 million to US$ 4.6 billion(due to the hike in the global prices of crude oil).
Non-Oil Export Proceeds (66.0 percent of total exports): Non-oil export proceeds increased by 12.7
percent to US$ 17.1 billion. This was traceable to the higher export proceeds of raw materials by 18.9
percent, finished goods by 14.3 percent and semi-finished goods by 7.4 percent. Exports of raw materials
moved up by US$ 312.5 million to US$ 2.0 billion, due to higher exports of some goods such as freshand dried fruits by US$ 122.0 million; and fresh, chilled or cooked vegetables by US$ 108.0 million.
Exports of finished goods increased by US$ 1.3 billion to US$ 10.6 billion, reflecting higher exports ofsome goods, mainly household electrical appliances by US$ 244.0 million; phosphate and mineral
fertilizers by US$ 203.3 million; and textiles by US$ 124.3 million. Semi-Finished Goods: Exports ofsemi-finished goods rose by US$ 296.7 million to US$ 4.3 billion, mainly ethylene-propylene polymers
by US$ 189.6 million. The following table shows the main export by commodities and Geographicaldistribution during FY 2017/2018.

94

Table4: The main Export by commodities & Geographical distribution during FY 2017/2018.
(US $ Mn)
ItemEU

8979.1
Total Exports:
5670.8Main Commodities:
Petroleum products x
1662.0
Crude Oil
2050.0Gold
10.4
Phosphate or mineral
392.5
fertilizers
Textiles
242.7
Ready-made clothes
165.4
Ethylene-propylene
176.2
polymer
Organic and inorganic
159.4
compounds
Householdelectrical
192.8
appliances
Fresh, chilled, or cooked
186.2
vegetables
Wires and cables
277.0
Fresh or dried fruits
156.2
Source: Central Bank of Egypt* Provisional
x Including natural gas & bunker and jet fuel.

Other
Euro.
Count
2126.61466.2
370.6
0.0
67.8
278.9

USA

Arab
Count

Asian
Count

Other

2080.71391.6
459.7
95.9
155.0
50.3

6037.72966.9
499.1
0.0
904.4
149.1

2678.91883.5
376.9
924.9
9.4
69.5

3924.03276.1803.91530.0
602.2
24.5

212.4
96.2
256.1

222.2
229.2
41.0

94.0
76.3
158.4

95.5
142.9
60.6

28.7
6.2
13.2

118.5

58.2

126.8

59.7

46.3

38.3

15.6

391.1

65.9

36.7

20.0

29.4

205.9

18.3

64.1

0.6
6.8

16.2
18.9

208.6
153.2

7.9
52.0

32.6
87.7

The following figure illustrates the Relative Structure of Non-Oil Exports by Degree of Processing
during FY 2017/2018.
Figure 3: Non-Oil Exports by Degree of Processing during FY 2017/2018.
Materials

Source: Central Bank of Egypt

The following figure illustrates the oil and Non-Oil export during FYs 2016/2017 and FY 2017/2018.
Figure 4: Oil and Non-Oil export during FYs 2016/2017 and FY 2017/2018.

Source: Central Bank of Egypt

95II.1.3.2 Imports
Import increased by 6.9 percent to US$ 63.1 billion (versus US$ 59.0 billion), as non-oil imports
increased by 7.7 percent to US$ 50.6 billion (against US$ 47.0 billion), and oil imports by 3.9 percent
to US$ 12.5 billion (against US$ 12.0 billion).
Oil Import Payments (19.8 percent of total imports): Oil imports went up by 3.9 percent to US$ 12.5
billion. This increase was due to increase imports of crude oil by US$ 635.5 million to US$ 2.5 billion(due to the hike in imported quantities), while imports of oil products decreased by US$ 161.2 million
to only US$ 10.0 billion.
Non-Oil Import Payments (80.2 percent of total imports): Non-oil import payments increased by 7.7
percent to US$ 50.6 billion, reflecting the rise in imports of intermediate goods by 25.5 percent,consumer goods by 2.8 percent, and investment goods by 1.4 percent. however, imports of raw materials
scaled down by 4.3 percent, intermediate goods rose by US$ 4.0 billion to US$ 19.8 billion, on the backof the higher imports of some goods, mainly cast iron by US$ 742.4 million, and wood in the rough anddensified wood by US$ 336.7 million. Consumer Goods Imports increased by US$ 359.7 million to
US$ 13.0 billion during the year under review. Investment Goods Imports increased by US$ 121.4
million to record US$ 8.9 billion, due to the rise in the imports of some goods, mainly machines andappliances for agriculture or horticulture by US$ 274.5 million; and machines & appliances for printing
by US$ 141.0 million. Raw material imports declined by US$ 264.9 million to only US$ 5.9 billion, due
to lower imports of some goods, mainly wheat by US$ 606.2 million, and iron ores by US$ 145.0 million.
The following table shows the main imports by commodities and Geographical distribution during FY
2017/2018.
Table5: The main imports by commodities & Geographical distribution during FY 2017/2018.
(US $ Mn)
Item

EU

USA

16709

Other
Euro.
Count
4258.2

Total import
Main Commodities:
Petroleum products x
Crude oil
Wheat
Spare
parts
and
accessories for cars andtractors
Medicines
Organic and inorganic
compounds
Maize
Polypropylene
Spare parts for machines
Cast iron
TextilesPassenger vehicles
Wood in the rough anddensified wood
Source: Central Bank of Egypt

Asian
Count

Other

914.3
322.9
0.0
27.6
18.5

Arab
Count
.
12370.
78449.74241.52441.23.8
65.4

12558.
53505.9
400.4
0.0
0.2
712.5

14266.
2
6108.82655.90.01343.625.3

6365.91772.5
93.2
194.6
407.9

1661.7
562.2
0.0
1.1
50.9

677.7
595.0

391.1
129.5

54.2
150.7

78.6
235.9

91.2
382.6

36.8
53.1

112.1
270.4
606.8
352.0
97.9
422.3
763.5

6.9
40.6
84.5
176.6
181.0
16.3
21.0

79.9
80.7
92.3
19.1
16.0
34.0
18.4

23.0
524.1
170.4
436.0
85.5
106.4
37.9

2.4
485.2
291.7
136.1
713.8
173.2
116.6

1348.8
9.2
48.0
410.1
4.4
12.0
161.6

2940.6

The following figure illustrates the oil and Non-Oil import during FYs 2016/2017 and FY 2017/2018.

96

Figure 5: the oil and Non-Oil import during FYs 2016/2017 and FY 2017/2018

Source: Central Bank of Egypt

the following figure illustrates Relative Structure of Non-Oil Imports by Degree of Use during FY
2017/2018.
Figure 6: Relative Structure of Non-Oil Imports by Degree of Use during FY 2017/2018.

Undistributed
Goods 4.8%

Consumer Goods
25.7%

Investment Goods
17.6%

Other Fuel, Mineral
Oils & Products 1.1%
Raw Materials 11.7%

Intermediate Goods
39.1%

Source: Central Bank of Egypt

II.1.4 Services Balance
The services surplus widened by 98.1 percent to US$ 11.1 billion (compared to US$ 5.6 billion), as theincrease in services receipts improve faster than that in services payments. The following figure illustrate
the Service Balance during the FY 2016/2017 and 2017/2018:97

Figure 7: The Service Balance during the FY 2016/2017 and 2017/2018:

Source: Central bank of Egypt

II.1.4.1 Services Receipts
Services receipts rose by 39.5 percent to US$ 21.5 billion (from US$ 15.4 billion). This was a result of
the rise in most items as follows: Travel receipts (tourism revenues) increased by 123.9 percent to
US$ 9.8 billion (from US$ 4.4 billion), as the number of tourist nights have increased to 102.6 million
from 50.9 million, with the increase in the average spending per tourist a night. Transportation receipts
rose by 10.1 percent to US$ 8.7 billion (compared to US$ 7.9 billion). The rise mainly reflected theincrease in Suez Canal receipts by 15.4 percent to US$ 5.7 billion (from US$ 4.9 billion), due to theincrease in net tonnage of vessels by 9.8 percent and the appreciation of SDR versus the US dollar by
3.8 percent on average. Other services receipts rose by 0.2 percent to US$ 2.3 billion, due to enhance
performance of construction and contracting; agencies’ commissions and fees; and advertising andmarketing researches. On the other hand, government receipts fell by 18.0 percent, to US$ 636.7 million(against US$ 776.4 million), due to the fall in other government receipts. The following figure displays
Number of Tourist Nights and Tourism Revenue during FYs 2013/2014 to FY 2017/ 2018.
Figure 8: Number of Tourist Nights and Tourism Revenue during FYs 2013/14 to FY 2017/ 18.

Source: Central Bank of Egypt

The following figure illustrates Development of Net Tonnage and Suez Canal Receipts during FYs
2013/14 to FY 2017/ 18.

98

Figure 9: Development of Net Tonnage and Suez Canal Receipts during FYs 2013/14 to FY 2017/18.

Source: Central Bank of Egypt

II.1.4.2 Services Payment
Services payments increased by 5.9 percent to US$ 10.4 billion (from US$ 9.8 billion), reflecting theincrease in most of its items as follows: Government expenditures rose by 32.9 percent to US$ 1.5
billion (against US$ 1.1 billion), due to the increase in salaries & expenses of government employees
seconded abroad, and the expenses of Egyptian embassies abroad. Other services payments rose by 7.6
percent to US$ 4.9 billion (from US$ 4.6 billion), due to the increase in the amounts transferred abroadby foreign petroleum companies. As the payments of communication services, royalties & license fees,
computer services, and subscriptions for magazines & journals have increased. Transportation payments
rose by 11.1 percent to US$ 1.5 billion (compared to US$ 1.3 billion). As the amounts transferred byforeign navigation and aviation companies; those transferred for aircraft and ship leasing, and thosetransferred for transportation services have increased. On the other hand, travel payments decreased by
10.5 percent to US$ 2.5 billion (compared with US$ 2.7 billion), primarily reflecting a decrease in ecard payments abroad. The service balances components during the FY 2016/2017 and 2017/2018.
Figure10: The service balances components during the FY 2016/2017 and 2017/2018.

Source: Central bank of Egypt

99II.1.5 Investment Income Balance
Investment income deficit increased by 37.5 percent to US$ 6.3 billion (against US$ 4.6 billion) during
the FY2017/2018. The investment income payments recorded US$ 7.1 billion (compared with US$ 5.1
billion), as profit transfers of foreign companies operating in Egypt (petroleum and non-petroleum)constituted 58.7 percent of total payments. On the other hand, the investment income receipts recorded
only US$ 835.4 million (against US$ 497.9 million). The following figure illustrate the income balance
during the FY 2016/2017 and 2017/2018.
Figure 11: The income balance during the FY 2016/2017 and 2017/2018.

Source: Central bank of Egypt

II.1.6 Net Unrequited Current Transfers
During the year under review the Net unrequited current transfers rose by 21.2 percent to US$ 26.5
billion (against US$ 21.8 billion), reflecting the following developments: Net private transfers increased
to US$ 26.3 billion (from US$ 21.7 billion) driven by an increase of US$ 4.6 billion in remittances of
Egyptians working abroad. Net official transfers increased from US$ 149.0 million to US$ 206.2 million.
The figure below illustrates the remittance of Egyptians working abroad during FY 2016/2017 and2017/2018.
Figure 12: The remittance of Egyptians working abroad during FY 2016/2017 and 2017/2018.

Source: Central bank of Egypt

100II.1.7 Capital and Financial Account
The capital and financial account achieved a net inflow of US$ 22.0 billion in FY 2017/18 (against
US$ 31.0 billion in the previous fiscal year). The following development reflected: FDI in Egypt
recorded inflows of US$ 13.2 billion and outflows of US$ 5.4 billion. As a result, net FDI in Egypt
posted US$ 7.7 billion (inflows). As the net investments of the oil sector registered US$ 4.5 billion. The
figure below illustrates the total FDI in Egypt by Economic Sector during FY 2017/2018
Figure 13: The total FDI in Egypt by Economic Sector during FY 2017/2018.

Source: Central bank of Egypt

Table 6 illustrate the sectoral distribution of total FDI flows to Egypt during year 2016/2017 and2017/2018
Table6: The Sectoral distribution of total FDI flows to Egypt during years 2016/17 and 2017/18:
FY July/Sept.
Activity Sector
2016/17*
Total FDI Flows to Egypt
Oil
Manufacturing
Agriculture
Construction
Services, of which:Real estate
Finance
Tourism
Communication and IT
Other services
Undistributed
Source: Central Bank of Egypt

Share (%)
13366.1
8191.6
776.4
21.3
120.8
1261.1
420.1
221.2
50.7
38.8
530.3
2994.92017/18*
100
61.3
5.8
0.2
0.9
9.4
3.1
1.6
0.4
0.3
4.0
22.4

Share (%)
13163.1
8859.11314.315.3
590.8
1476.0
355.2
244.7
43.0
444.6
388.5
907.6

100
67.3
10.0
0.1
4.5
11.2
2.7
1.9
0.3
3.4
2.9
6.9

II.1.7.1 Foreign Direct Investment in Egypt
According to the geographical distribution of foreign trade and main trade partners, foreign trade (oiland non-oil) between Egypt and all economic groups increased. Egypt's foreign trade with non-ArabAsian countries went up by 22.0 percent, Russian Federation and the Commonwealth of Independent
States by 13.9 percent, the EU countries by 12.0 percent, other European countries by 8.3 percent, theUSA by 6.5 percent, the Arab countries by 5.9 percent, the non-Arab African countries by 3.4 percent,and Australia and other countries & regions by 1.7 percent. At the level of trade partners, both the UAE
and China came on top as the main trade partners with Egypt followed by the USA, Saudi Arabia, Italy

101

and others. These countries combined constituted 48.3 percent of total foreign trade. The figure below
shows the volume trade by geographical distribution FY 2017/2018
Figure 14: The Volume Trade by Geographical Distribution FY 2017/2018
EU

25.7

Arab Countries
Asian Countries

18 .4
15.2

Australia & Other Countries &Regions
Other European Countries

11.7
6. 4

Russian Federation & C.I.S.

5.1

USA

5.0

African Countries

US$ bn

1.4
0

3

6

9

12

15

18

21

24

27

Source: Central Bank of Egypt

The following figure illustrates the Net FDI in Egypt during FYs 2016/17 and FY 2017/18.
Figure 15: Net FDI in Egypt during FYs 2016/17 and FY 2017/18.

Source: Central Bank of Egypt

II.1.7.2 Portfolio Investment in Egypt
Portfolio investment in Egypt declined, recording a net inflow of US$ 12.1 billion (against US$ 16.0
billion). This was mainly due to the decrease investments of the foreigners in Egyptian Treasury bills,
resulting in net purchases of US$ 6.5 billion (against US$ 10.0 billion). This was due to the current
aspect of foreign investors to diversify his investments in the emerging markets. The following figure
illustrates the Net Portfolio investment in Egypt during FYs 2016/2017 and FY 2017/2018.

102

Figure 16: Net Portfolio investment in Egypt during FYs 2016/2017 and FY 2017/2018.

Source: Central Bank of Egypt

II.1.8 Foreign Exchange and Dollar Interbank Markets
On the 3rd of November 2016, the CBE took the decision of the liberalization of the Egyptian pound
exchange rate, to be quoted according to the dynamics of supply and demand. This decision came aspart of the economic reform program and this led to greater transparency and foreign exchange liquidity
through attracting greater investment and the correction of assets prices. As a result of this policy, theEgyptian pound appreciated against US dollar and moved from 7.7 LE per 1$ to be 17.8 LE per 1$.
Banks’ foreign currency resources reached US$ 63.7 billion in FY 2017/2018 (of which US$ 45.2 billion,
or 71.0 percent of the total, were customers' sales and US$ 18.5 billion, or 29.0 percent of the total, were
investment inflows), against US$ 36.1 billion in FY 2016/2017 (of which US$ 24.4 billion, or 67.6
percent of the total, were customers' sales and US$ 11.7 billion, or 32.4 percent of the total, were
investment inflows).
The weighted average of the US dollar interbank rate posted LE 17.8878 at end of June 2018 (against
LE 18.0911 at end of June 2017), with a rise of 1.1 percent in the value of the Egyptian pound during
FY 2017/2018. The following figure illustrate the Exchange rates of USD & Euro against EGP during
FY 2016/2017 and 2017/2018.
Figure 17: The Exchange rates of USD & Euro against EGP during FY 2016/17 and 2017/18.

Source: Central Bank of Egypt

103

II.1.9 Management of International Reserves
Net international reserves (NIR) at the CBE increased by US$ 13.0 billion or 41.4 percent in FY
2017/2018. The balance at the end of the year is US$ 44.3 billion (covering 8.4 months of merchandise
imports against 6.4 months at end of June 2017). The following figure illustrate the NIR& months ofimports covered (Balance at End of the Month) during June 2015 to June 2018.
Figure 18: NIR & Months of Imports Covered (Balance at End of the Month)

Source: Central Bank of Egypt

The foreign currency with banks increased during the period concerned reaching US $ 40.2 billion at
the end of June 2018. Also, the local currency deposits increased. The following figure illustrate thedevelopment in deposits by local and foreign currencies (end of month) during period 2015 to 2018.
Figure 19: The development in deposits by local and foreign currencies

Source: Central Bank of Egypt.

II.1.10 External Debt Indicators
Egypt’s external debt indicators are within the thresholds under the Joint World Bank-IMF Debt
Sustainability Framework for Low-Income countries. External debt reached US$ 92.6 billion at end of104

June 2018, up by 17.2 percent compared to the end of June 2017. This increase was due to the rise in
net acquired loans by US$ 13.2 billion in addition to the appreciation of most currencies of borrowing
versus the US dollar by US$ 0.4 billion. The indicators show as compared to peer regional country groupthat:The ratio of external debt to GDP reached 37.0 percent at end of June 2018 (65.1 percent was owed
to Central and Eastern Europe and 44.7 percent to Latin America and the Caribbean).

The ratio of short-term external debt to total external debt reached 13.3 percent at end of June 2018(21.1 percent was owed to Central and Eastern Europe and 14.2 percent to Latin America and the
Caribbean).
The structure of medium- and long-term external debt at the end of June 2018 included rescheduledbilateral loans which registered US $ 7.6 billion, other bilateral loans reached US$ 7.6 billion, buyers‘&supplier’s credit reached US$ 8.4 billion, and debt of international and regional organizations
recorded US$ 28.4 billion. The balance of Egyptian bonds and notes abroad which held by non-resident
reached US $ 14.3 billion. Long-term deposits from Arab countries reached US$ 17.4 billion. Nonguaranteed debt of the private sector posted US$ 459.9 million. The following table illustrate the external
debt indicators during FY 2016 to 2019
Table 7: The external debt indicators during FY 2016 to 2019
Indicators (%)
Long-term External Debt / Total External Debt
Short-term External Debt / Total External Debt
Short-term External Debt / Net International Reserves

2016

Government External Debt / Total External Debt
Government External Debt / GDP**
Source: Central Bank of Egypt

2017

2018

2019

87.4
12.6
40.0

84.5
15.5
39.2

86.7
13.3
27.8

89.8
10.2
24.9

43.8
7.3

44.1
14.8

51.4
19.0

52.7
19.0

The following figure shows the external debt structure at the end of June 2018.
Figure 20: External Debt Structure at the End of June 2019

Source: Central Bank of Egypt

The short-term external debt increased by US$ 9.3 million at the end of June 2018 to record US$ 12.3
billion or 13.3 percent of total external debt. This increase was due to the pickup in cash loans and thedecline in short term deposits. The following figure illustrates the short-term external debt structure at
the end of June 2018105

Figure 21: The short-term external debt structure at the end of June 2018

Source: Central Bank of Egypt

The break down of external debt by creditor at the end of June 2018 illustrates the following: theinternational and regional organization granted US$ 28.4 billion, US$ 23.1 billion were owed to Arabcountries, mainly Saudi Arabia, UAE, and Kuwait, US$ 14.3 billion represented the balance of Egyptianbonds and notes issued abroad and held by foreigner. The other US$ 14.7 billion were owed to fivemembers: Germany (7.7 percent), Japan (2.5 percent), France (2.2 percent), UK (2.0 percent), the USA(1.6 percent), and (5.5 percent) were owed to china. The following figure illustrates External debt by
Creditor at the end of June 2018.
Figure22: External Debt by Creditors at the End of June 2018

Source: central Bank of Egypt

II.2 Domestic Environment
II.2.1 Gross Domestic Product (GDP)Real GDP growth at factor cost increased to 5.2 percent in FY 2017/2018 against 3.6 percent in theprevious year. Similarly, real GDP at market prices rose to 5.3 percent (against 4.2 percent a year earlier),
thereby achieving the highest growth rate in the last 10 years, thanks to the economic reform measures
adopted by Egypt. Table 3 shows the real GDP rates in FY 2016/2017and 2017/2018.

106

Table 8: Real GDP rates in FY 2016/2017and 2017/20148
Item

Value (in LE bn)
2016/173409.560.5
3470.0Real GDP at factor cost
Indirect taxes (net)
Real GDP at market prices
Source: Central Bank of Egypt

2017/18
3588.466.0
3654.4Rate of Change (%)
2016/172017/18
3.6
4.2

5.2
5.3

The figure below shows the Real GDP Growth Rate (at factor cost) during the FY 2014/15 to 2017/18:
Figure 23: The Real GDP Growth Rate (at factor cost) during the FY 2014/15 to 2017/18:

Source: Central Bank of Egypt

On the supply side, the increase in real GDP growth at factor cost to 5.2 percent in FY 2017/2018 (from3.6 percent in the previous FY) came as due to the improvement in the contributions of the following
sectors: manufacturing (0.8 percentage point), extractions and tourism (0.7 point each), construction andbuilding (0.6 point), wholesale and retail trade (0.5 point), and real estate and agriculture (0.4 pointeach). The figure below shows the rate of change in real GDP during FY 2016/2017 and 2017/2018:
Figure 24: Rate of Change in Real GDP during the FY 2016/2017 and 2017/2018
%

50
45
40
35
30
25
20
15
10
5
0
-5

2016/2017
37.7

7.7
3.1

10.4

10.0
4.8

4.2

3.2

3.8

2017/2018

9.6
3.3

Source: Central Bank of Egypt

107

3.7

3.4

3.4

3.7

1.5

3.5

As regards the private and public sectors' contributions to real GDP growth (5.2 percent), the private
sector contribution reached 3.7 percentage points during the reporting year. This was due to the rise in
the shares of tourism (0.7 point), manufacturing (0.6 point), construction & building and wholesale &retail trade (0.5 point each), and real estate and agriculture (0.4 point each). Meanwhile, thecontributions of other sectors combined reached 0.6 percentage point. On the other hand, thecontribution of the public sector to GDP growth reached only 1.5 percentage point, due to thecontributions of these sectors: extractions (0.6 point), and Suez Canal and manufacturing (0.2 pointeach).
On the demand side, the real GDP growth at market prices increased to 5.3 percent during the year(compared with 4.2 percent in the previous FY). This was driven by the rise in the contributions of: (i)domestic demand (consumption and investment) that reached 3.5 points, and (ii) net external demand(exports of goods and services less imports of goods and services expressed in LE) which reached 1.8
point as the increase in exports (32.2 percent) surpassed that of imports (11.3 percent). The table below
illustrate Rates of Change and Shares of Demand Components in Real GDP Growth (at Market Prices)in FY 2016/2017 and 2017/2018
Table 9: Rates of Change and Shares of Demand Components in Real GDP Growth (at Market
Prices) in FY 2016/2017 and 2017/2018

Real GDP Growth
1- Domestic Demand
A- Final Consumption
PrivatePublicB- Capital Formation (Including Change inStock)
2- Net External Demand
A- Exports of Goods and Services
B- Imports of Goods and Services
Source: Central Bank of Egypt

Rates of Change + (-)
During FY
2016/2017- 2017/2018
(%)
4.2
5.0
4.0
4.2
2.5

5.3
3.1
1.2
1.1
1.7

Share in Real GDP Growth
During FY
2017/2018(% Point)
5.3
3.5
1.1
1.0
0.1

11.3

15.7

2.4

13.7
86.0
52.5

(13.2)
32.2
11.3

1.8
5.1
3.3

The share of domestic demand (3.5 percentage points) came on the back of the contribution of final
consumption (government and private) that posted 1.1 percentage point, plus the contribution of capitalformation that registered 2.4 percentage points (reflecting the rise in investments at constant prices by
16.9 percent during the reporting year), to stand at LE 601.3 billion. The reporting year witnessed aremarkable growth in investments at current prices by 40.2 percent to LE 721.1 billion compared with
LE 514.3 billion in the previous year. Investments of the public sector implemented 56.1 percent, while
private investments posted 43.9 percent of total investments. The distribution of these investments
presented as follows: productive service (17.3 percent); social services (education, health, sanitation andothers) (11.8 percent); electricity (11.3 percent); real estate (11.2 percent); extractions (11.0 percent);
manufacturing (7.9 percent); agriculture, irrigation and fishing (3.4 percent); and construction andbuilding (1.8 percent).
II.2.2 Labor Force, Employment and Unemployment
According to CAPMAS quarterly Labor Force Sample Survey (LFS) for Q4 (April/June 2017/2018),
the size of labor force slightly declined by 0.5 percent, as compared with the corresponding quarter of
FY 2016/2017, reaching 29.0 million persons. In contrast, the number of employed persons increasedby 1.8 percent, to stand at 26.1 million persons. The majority of the total number of employed persons
concentrated in the agriculture and finishing sector registered (23.1 percent) during the quarter underreview, followed by wholesale and retail trade (13.7 percent), then manufacturing (12.1 percent), andconstruction and building (11.5 percent).

108

Unemployment rate (%)

Figure 25: Developments of Labor Force Indicators

14.0

13.2

12.8

13.0

12.5

11.8

12.0

11.9

12.0

11.3

3.5

10.6

9.9

10.0

3.0
2.5
2.0

8.0
6.0

1.5

4.0
2.0
0.0

0.5

1.0

2013

2014

2015

2016

0.0
2017 April/June July/Sept Oct./Dec.Jan./March April/June
2017 . 2017
2017
2018
2018

Unemployment Rate

Labor Force

Employment

Source: Central Bank of Egypt

The number of unemployed retreated by 17.8 percent in the quarter under review (compared with thecorresponding quarter of the preceding FY), to reach 2.9 million persons. Thus, the unemployment rate
fell to 9.9 percent of the total labor force (the lowest rate since 2011), versus 12.0 percent in thecorresponding quarter a year earlier.
II.2.3 Inflation
II.2.3.1 Consumer Price Index (CPI)The annual headline CPI (urban) decreased at the end of FY 2017/2018 to register 14.4 percent(June/June), against a pickup of 29.8 percent at the end of the previous FY. The decline in inflation rate
(14.4 percent) was mainly due to the lower contribution of food and non-alcoholic beverages to 5.3
percentage points (against 19.6 points). Add to this the lower contributions of some other groups, mainly,
culture and recreation (0.2 point against 1.2 point); restaurants and hotels (0.6 point against 1.3 point);
clothing and footwear (0.6 point against 1.2 point); furnishings, household equipment and routine
maintenance (0.4 point against 0.9 point); and alcoholic beverages and tobacco (0.8 point against 1.3
point). The decline was tied by the higher contributions of the following groups: transportation (2.4
points against 1.1 point); housing, water, electricity, gas & fuel (2.0 points against 1.0 point); education(0.9 point against 0.7 point); and communications (0.2 point against nil). The following figure illustrates
the contribution of Main Food and Beverages Items to Annual Headline Inflation During the Fiscal Year
2016/2017-2017/2018

109Figure 26: Contribution of Main Food and Beverages Items to Annual Headline Inflation During
the Fiscal Year 2016/2017-2017/2018
Percentage Point
2016 /20172017 / 2018

6.0
5.0
4.0
3.0
2.0
1.0
0.0
Bread & Cereals Meat & Poultry Fish & Seafood Milk, Cheese &Eggs

Vegetables

Non-Alcoholic
Beverages

Source: Central Bank of Egypt

The following table shows the rates of change and shares of CPI groups (urban) in headline inflation in
the years of review and comparison:
Table10: CPI Change Rate and Contribution of Main CPI Groups in headline inflation in the
periods of review and comparison:
Main CPI Groups

Share in Headline Inflation (% point)
relative Weight Inflation Rate (%)
2016/172017/18

2016/172017/18

General Index
Food and non-alcoholic

100.0

29.8

14.4

29.8

14.4

beverages

39.92
2.19
5.41
18.37
3.77

40.3
33.9
29.7
7.7
28.2

10.1
21.2
14.9
18.4
12.6

19.6
1.3
1.2
1.0
0.9

5.3
0.8
0.6
2.0
0.4

6.33
5.68
3.12
2.43
4.63
4.43
3.72

12.7
25.9
1.8
48.3
12.3
24.5
31.9

11.3
55.1
11.0
7.2
19.6
12.9
16.7

0.7
1.1
0.0
1.2
0.7
1.3
0.8

0.6
2.4
0.2
0.2
0.9
0.6
0.4

Alcoholic& tobacco
Housing, water, electricity,
gas & fuel maintenance
Healthcare
Transportation
Communications
Culture & recreation
Education
Restaurants and hotels
services
Source: Central Bank of Egypt

The following figure illustrates Annual Change in Headline Consumer Price index (Urban)& Food andnon- alcoholic beverages during FY 2018.

110

Figure 27: Annual Change in Headline Consumer Price index (Urban)& Food and non- alcoholic
beverages during FY 2018.

Source: central Bank of Egypt

The decrease in food and non-alcoholic beverages (5.3 percentage points against 19.6 points) was owed
to the lower contribution of all the following subgroups: meat and poultry (0.9 point against 5.2 points);
vegetables (1.5 point against 3.9 points); milk, cheese and eggs (0.9 point against 2.9 points); fish andseafood (0.2 point against 1.6 point); and oils and fats (0.2 point against 1.5 point)
II.2.3.2 Producer Price Index (PPI)The headline PPI inflation rose in FY 2017/2018 by 34.0 percent against a rise of 23.5 percent in thepreceding FY. This was mainly driven by the higher contributions of mining and quarrying (14.5
percentage points against 0.5 point); as well as water supply, sanitation, and waste treatment andmanagement (0.7 point against 0.1 point). This rise was alleviated by the retreat of the contributions of
the following items: food services and accommodation (0.1 point against 2.0 points); agriculture andfishing (3.9 points against 4.9 points); manufacturing (14.3 points against 15.1 points); electricity, gas,steam, and air conditioning supplies (0.5 point against 0.8 point); and transportation and storage (nilagainst 0.1 point). The following figure display Annual Rate of Change in Producer Price Index during
FY 2015/2016 and 2017/2018.
Figure 28: Annual Rate of Change in Producer Price Index during FY 2015/2016 and 2017/2018.
%

40
35
30
25
20
15
10
5
0

34.0
23.5
14.9

2015/20162016/2017

Source: Central Bank of Egypt

111

2017/2018

II.2.4 Monetary Policy
As the main objective of the monetary policy is price stability, the CBE strives to bring inflation to an
appropriate and stable level which could increase confidence and stimulating investment and achieving
the targeted economic growth. The operational target of the monetary policy is to stimulate overnightinterbank interest rate whereby a framework based on the corridor system is applied, within which theceiling is the overnight interest rate on lending from the Central Bank and the floor is the overnight
deposit interest rate at the Bank. The excess liquidity declined in December 2018 to record 717.3 billion(13.5% of GDP). This absorption of excess liquidity was due to the seven days deposits auction andovernight deposit facility. The real monetary conditions remained tight despite the potential of future
inflationary pressures from fiscal consolidation measures and the attempts to increasing lending
activities and aid investment and consumption. To maintain tight monetary policy, the CBE decided toraise the overnight deposit and lending rates by 200 basis points to 18.75 percent and 19.75 percent.
Also, the rate of the CBE’s main operation and discount rate were raised by 200 bps to 19.25 percent
each. By adopting the tighten monetary policy for the purpose of containing the inflation in the Egyptian
economy, the inflation rate continued to fall. However, in 29 March 2018, the CBE decided to ease thetight stance that was successfully adopted and decreased the inflationary pressures. Accordingly, theovernight deposit and lending rates were lowered by 100 basis points to 17.25 percent each.
II.2.4.1Interest Rate
The CBE decision during the year affected both the overnight interbank interest rates and the interest
rates on LE loans and deposits at banks. The MPC’s decision during FY 2017/18 - whether by raising,maintaining, or lowering the interest rates - along with the CBE’s sustained policy to absorb excess
liquidity from the banking system through its longer maturities deposit acceptance operations - led toadopt high overnight interbank rates, to closely approach the mid-corridor level since the start of the
fiscal year. However, down trend was taken since August 2017, moving closer to the overnight deposit
rate and maintained this down trend. The decisions taken by the MPC during FY 2017/18 affected themoney market interest rates. The following figure displays the Overnight Deposit Rate in % during June2013 to June 2018.
Figure 29: Overnight Deposit Rate in % during June 2013 to June 2018.

Source: Central bank of Egypt

The figure below displays the Excess Liquidity in EGP billion during years 2014 to 2018.

112

Figure 30: The Excess Liquidity in EGP billion during years 2014 to 2018.

Source: Central Bank of Egypt

The following table display the interest rate during June 2017/June 2018.
Table 11: The Interest Rate in The Money Market during June 2017/June 2018:
Month

June 2017(%)

Deposits
More than one month and up to three months

11.2

June
2018(%)
11.7

More than three months and up to six months
More than six months and up to one year
Loans*For one year or less
Source: Central Bank of Egypt

12.6
12.2

12.9
12.9

18.0

18.2

The figure below displays O/N Interbank and CBE policy rates during years 2013 to 2018
II.2.4.2Reserve Money
Reserve money reached LE 716.3 billion at end of June 2018, up by LE 138.7 billion or 24.0 percent
during FY 2017/2018 (against an increase of LE 99.5 billion or 20.8 percent a year earlier). The increase
in reserve money in this FY was reflected in the increase in the following: (i) banks' local currency
deposits at the CBE increased by LE 108.2 billion or 86.2 percent, to reach LE 233.8 billion at end ofJune 2018 (ii) the currency in circulation outside the CBE increased by LE 30.5 billion or 6.7 percent,to reach LE 482.5 billion or 67.4 percent of reserve money at end of June 2018. In addition to the risein issued banknote by LE 33.6 billion or 7.4 percent, to posted LE 486.7 billion at end of June 2018.The
breakdown of the currency in circulation outside the CBE showed a continued rise in the importance of
the LE 200 note, while the relative importance of LE 100 and LE 50-note declined. Consequently, theaverage value of the banknote decreased to about LE 58.68 at the end of June 2018, compared with LE
60.65 at the end of June 2017.
II.2.4.3 Domestic Liquidity and Counterpart Assets
The domestic liquidity (M2) grew by LE 536.1 billion or 18.4 percent to LE 3454.3 billion during the
FY 2017/2018. It represented 77.8 percent of GDP for the year ending in June 2018. Such a rise was adual effect of the increase in both quasi-money and money supply. The former increased by LE 423.0
billion or 19.1 percent during the reporting year to LE 2633.7 billion or 76.2 percent of total domestic
liquidity at end of June 2018. The latter also rose by LE 113.1 billion or 16.0 percent to LE 820.6 billion113

at end of June 2018. The following figure displays development of F/C Deposits during period from2002 to 2018.
Figure 31: Development of F/C Deposits during period from 2002 to 2018.

Source: Central Bank of Egypt

The following figure shows Contribution to adjust M0 and the money multiplier during period from2002 to 2018.
Figure 32: Contribution to adjust M0 and the money multiplier during period from 2002 to 2018.

Source: Central Bank of Egypt

Table below shows CBE Financial Position Reserve Money and Counter Part Assets during FYs 2016
to 2018.

114

Table 12: CBE Financial Position Reserve Money and Counter Part Assets during FYs 2016 to2018:
End of June
Reserve Money
Currency in circulation outside CBE *Banks' deposits in local currency at CBECounterpart Assets
Net Foreign Assets
Foreign Assets
Gold
Foreign securities
Foreign currencies
Foreign Liabilities
Net Domestic Assets
Net Claims on Government+
Claims; of which:Government securities
Deposits
Net Claims on Banks
Claims
Deposits in foreign currencies
Other Items (Net)
Source: Central Bank of Egypt

2016478076368459109617478076-44863149943
22820
32795
94328
19480652293961941070688539083087475
59621
12043260811-1560922017
5775824520351255475775823690
55151446910
225711278893547824573892708637821975714454113338157141286855129714-2918862018
716309482541233768716309301494775955
47066
54405718483247446141481571547475988068362944406
201439326027124588-502098

The following figure illustrates Domestic Liquidity Components at the End of June 2018
Figure 33: Domestic Liquidity Components at the End of June 2018

Source: central bank of Egypt

II.2.4.4 Banks
The banks operating in Egypt registered (38 in number) and their aggregate financial position posted LE
5080.6 billion at end of June 2018, up by LE 659.7 billion or 14.9 percent in FY 2017/2018, against arise of LE 1574.8 billion or 55.3 percent in the preceding FY. 79.7 percent of the rise on the liabilities
side during the year rose from deposits at banks which grew by LE 525.8 billion or 17.4 percent, posting
LE 3553.6 billion at end of June 2018. The banks’ equities also, increased by LE 48.6 billion, bonds andlong-term loans by LE 21.6 billion, and obligations to banks in Egypt (including the CBE) by LE 10.7
billion. Meanwhile, obligations to banks abroad fell by LE 6.3 billion. The following figure illustrates
Relative structure of Liabilities at the End of June 2018.

115

Figure 34: Relative structure of Liabilities at the End of June 2018.

Source: central bank of Egypt

On the other hand, the increase on the assets side was mostly attributed to the rises in balances with local
banks (including the CBE) by LE 288.6 billion to post LE 1165.1 billion at the end of June 2018.
Likewise, lending and discount balances rose by LE 203.2 billion and banks' investments in securities
and TBs by LE 143.8 billion. On the other hand, balances with banks abroad declined by LE 33.5 billion
worth. The following figure illustrates the Relative Structure of Assets at the End of June 2018
Figure 35: Relative Structure of Assets at the End of June 2018

Source: central bank of Egypt

The Following Table shows the Banks Aggregate Financial Position in FYs 2016 to 2018.

116

Table 13: Banks Aggregate Financial Position in FYs from 2016 to 2018.
End of June
AssetsCash
Securities & investments in TBs
Balances with banks in Egypt; of which:Lending and discount balances
Balances with banks abroad; of which:Lending and discount balances
Clients' Lending and discount balances
Other assets
Assets = Liabilities
Liabilities
CapitalReserves
Provisions
Bonds & long-term loans
Obligations to banks in Egypt
Obligations to banks abroad
Total deposits
Other liabilities; of which:
Payable cheques
Source: Central Bank of Egypt(LE Mn)
2018

2016

2017

31432
1283616374644
1682
51074
1391
942727162601284609457471
15370368765444713
2839662502
14264572393864420860

68332
168081111651393807
2504434730
16296642861815080570

100726
63002
66880
48532
60551
86060
211611730422610984

128420185846107859123960286116
194551302781136629712300

1491192137321092941455812968391881893553634
42418213281

The net transactions of local banks with correspondents abroad decreased by LE 27.2 billion worth or
30.4 percent during the year, registering a credit balance of LE 62.2 billion worth at end of June 2018(against LE 89.4 billion worth at end of June 2017). Such a decrease was attributed to the decline intheir balances with banks abroad by LE 33.5 billion worth. The table below shows the transaction of
local banks with correspondents abroad.
Table 14: The transaction of local banks with correspondents abroad for FY 2016/2017and2017/2018:(LE Mn)Change + (-) in FY
End of

June
2017

June
2018

2016/2017 2017/2018 Value %Net Position
Balances with banks abroad

89415
28396662255
250444124401 (355.6) (27160) (30.4)232892 456.0 (33522) (11.8)

Obligations to banks abroad
Source: Central Bank of Egypt

194551

188189108491 126.1 (6362) (3.3)

Value %

Banks' investments in securities and bills rose during FY 2017/2018 by LE 143.8 billion or 9.4 percent,to post LE 1680.8 billion. This rose up in Bank’s investments in treasury bills (up by LE 150.8 billion),
corporate equities (up by LE 3.5 billion), and non-government bonds (up by LE 1.7 billion). however,banks’ investments in government bonds decreased by LE 8.9 billion and in foreign securities by LE 3.3
billion worth. The following figure displays banks’ investment in securities and bills during FY June2017 and June 2018.

117

Figure 36: The structure of Bank’s’ Portfolio during FY June 2017 and June 2018.

%

70

60

55.7

June 2017

59. 9

50

June 2018
38.0

40

34.2

30
20
10
0

0.5
Treasury Bills

Gov. Bonds

0.5

Non-gov. Bonds

4.4

4.3

1.4 1.1

Corp. Equities

Foreign Securities

Source: Central Bank of Egypt

II.2.4.4.1 Deposits
Banks' deposits (including government deposits) grew, during the reporting year, by LE 525.8 billion or
17.4 percent (versus LE 911.7 billion and 43.1 percent in the previous FY), standing at LE 3553.6 billion
at end of June 2018.
Deposits in local currencies amounted to LE 2721.4 billion at end of June 2018, recording a rise of LE
600.6 billion or 28.3 percent during the reporting year. The main contributor, in this increase was thehousehold sector by 68.2 percent of the rise in local currency deposits during the reporting year. Its
deposits increased by LE 409.7 billion, to reach LE 1885.4 billion at end of June 2018. Likewise,
deposits of the government sector increased by LE 106.4 billion, recording LE 410.1 billion including
both the private and public business sectors by LE 73.9 billion and LE 8.6 billion, respectively; andthose of the external sector by LE 2.0 billion.
On the other hand, deposits in foreign currencies amounted to LE 832.2 billion worth, decreased by
LE 74.8 billion worth or 8.2 percent during the reporting year. This decline resulted from the drop in thedeposits of both the government and the private business sectors (by LE 97.6 billion worth and LE 2.7
billion worth, in order). Such a retreat was compensated by the rise in deposits of both the household
and public business sectors by LE 22.3 billon worth and LE 3.3 billion worth, respectively. The
following Table show Deposits at Banks by sector from June 2016 to June 2018:
Table 15: Deposits at Banks by Sector from June 2016 to June 2018:(LE Mn)End of June
Total Deposits
In Local Currency
Government sector
Public business sector *Private business sector
Household sector
External sector **In Foreign Currencies
Government sector
Public business sector *Private business sector
Household sector
External sector **Source: Central Bank of Egypt

2016

2017
2116117169159025802143733
26396111163169559
424527
96876
17925
99432
2064913803

20183027811212078730371447290
283312147567910792
90702420485838388
1929004630787800

3553634
272141841014755921
3571491885391
12810
83221610730541649
1901614853657736

The following figure shows Change Rate in Deposits by Sectors during FYs 2016/2017 and 2017/2018.

118

Figure 37: Change Rate in Deposits by Sectors during FYs 2016/2017 and 2017/2018.

70

Foreign
Currencies

Local
Currency

124.3
105.1

14.2

0
6.1
.1

(
(47.6

2

2

2

/

sectorGovernment sector
External sector/
Public business sector)

2017/20
Private business sector Household

Source: Central Bank of Egypt

II.2.4.4.2 Lending Activity
Banks expanded their lending activity by LE 203.2 billion or 14.2 percent in the reporting year (against
LE 483.7 billion and 51.3 percent a year earlier), bringing their lending balances to a total of LE 1629.6
billion, representing 32.1 percent of banks’ aggregate financial position at end of June 2018. The pickup
in lending and discount balances came on the rise in both local currency loans by LE 199.1 billion or
23.0 percent, to LE 1066.3 billion at end of June 2018, and in those extended in foreign currencies by
LE 4.1 billion worth or 0.7 percent, to LE 563.3 billion worth at end of June 2018. According, to thelending granted in foreign currencies, 42.0 percent went to the government sector whose share rose up
by LE24.4 billion worth. More than, loans extended to the household increased by 2.5 billion worth.
But the loans to the private sector was decreased to record LE 12.8 billion worth, those to public sector
by LE 7.5 billion worth and to the external sector by LE 2.5 billion worth. The following figure shows
Credit Facilitates by Economic Activity at End of June 2018.
Figure 38: Credit Facilitates by Economic Activity at End of June 2018.

Source: Central Bank of Egypt

119

The following figure displays the select market interest rate (in %) during years 2011 to 2018.
Figure 39: Select Market Interest Rate (in %) during years 2011 to 2018.

Source: Central Bank of Egypt

The following figure shows the short- term interbank Market yield Curve during 2018 (in % y/y)Figure 40: The short- term interbank Market yield Curve during 2018 (in % y/y)

Source: Central Bank of Egypt

The following table illustrates bank lending and discount balances by Sector from June 2016 to 2018
Table 16: Bank Lending and Discount Balances by Sector from June 2016 to 2018
(LE Mn)End of June
Total Lending and Discount
In Local Currency
Government sector
Public business sector *Private business sector
Household sector
External sector
In Foreign Currencies
Government sector
Public business sector *Private business sector
Household sector
External sector
Source: Central Bank of Egypt

2016

2017
94272767257810023065169
302396204470313
27014973510
27663
157261
3403
8312

2018
1426457
86721314271095621
396626231403853
55924421201352681
279601
6938
8011

1629664
1066324216549114349462915271752759
56334023636845228
2668299423
5492

II.2.4.4.3 Cash Flows
Bank’s' cash flows arising from local and foreign operations identifying the sources and uses of funds
during the fiscal year. Banks' sources of funds come from either an increase in obligations or a decreasein assets. Uses of funds are directed to increasing assets or reducing obligations.

120

Regarding local operations, the resources of banks were generated from the increase in obligations(LE 684.2 billion) and the decrease in assets (LE 27.2 billion) in FY 2017/2018. The rise in obligations
came mainly from deposits at banks which grew by LE 525.8 billion (reflecting the rise of LE 600.6
billion in local currency deposits and the retreat of LE 74.8 billion worth in foreign currency deposits).
The contribution of the household sector recorded about 82.2 percent of this rise as its deposits rose by
LE 432.0 billion. Similarly, equities increased by LE 48.6 billion, as well as obligations to the CBE (byLE 28.8 billion), loans & bonds (by LE 21.6 billion), provisions (by LE 1.5 billion) and other liabilities(by LE 57.9 billion). On the other hand, the decline in assets resulted primarily from the fall in balances
at local banks by LE 27.2 billion. In the reporting year, the cash flow revealed deficit in local operationsof LE 30.5 billion. However, external operation showed surplus equal to the deficit. The deficit of thelocal operation was financed by the surplus of external operation. The following table show Bank’s Cash
Flow Statement (local transaction) in the FY 2016/2017 and 2017/2018.
Table17: Banks' Cash Flows Statement in the FY 2016/2017 and 2017/2018.
Items
1. Total Resources

2016/2017(LE Mn)2017/2018
1466275
711423

A. From the Increase in Obligations
Deposits
Capital accounts (equities)
Obligations to the CBE

1466275911694150538130224684164525824
48585
28815

Obligations to local banks
Loans and bonds
Provisions
Other liabilities
B. From the Decrease in Assets
Balances with local banks
2. Total Uses:
A. To Reduce Obligations
Obligations to local banks
B. To Increase Assets
Balances with the CBE
Lending and discountInvestments in securities and bills
Balances with local banks
Cash
Other assets
Sources/Uses Surplus (+) or Deficit (-)
Source: Central Bank of Egypt

95341
75428
40979
62071
0
0
1332004001332004
40122248373024355010067826039
76785
134271

0
21621
1435
57884
27259
27259
74191018092
18092
723818315853203207147102
0
10861
46795
-30487

As for banks' external transactions, their resources aroused from the decline in assets as a reflection of
the decrease in both balances with banks abroad and investments in foreign securities and bills by LE
33.5 billion worth and LE 3.3 billion worth, respectively. Part of these funds was used in reducing
obligations, mainly obligations to banks abroad by the equivalent of LE 6.3 billon. The following figure
illustrates CIC outside the banking system (in %) during years 2002 to 2018.

121

Figure 41: The CIC outside the banking system (in %) during years 2002 to 2018.

Source: Central Bank of Egypt

The local banks are required to maintain minimum capital adequacy ratio 11.875 percent of the capitalbase to cover credit, market and operational risk. Also, for the branches of foreign banks, they are subject
to Basel regulation but not required to maintain the aforementioned ratio. The following table showbanks’ Cash Flows Statement (external transaction) during FY 2016/2017 and 2017/2018.
Table 18: Banks' Cash Flows Statement (External Transaction) during FY 2016/2017 and2017/2018:(LE Mn)During

2016/20172017/2018

1.Total Resources:108491

A. From the Increase in Obligations
Obligations to banks abroad

108491

B. From the Decrease in Assets
Balances with banks abroad
Investment in foreign securities and bills
2. Total Uses:
A. To Reduce Obligations
Obligations to banks abroad
B. To Increase Assets
Balances with banks abroad
Investment in foreign securities and bills
Sources/Uses Surplus (+) or Deficit (-)
Source: Central Bank of Egypt

368490108491000242762
0
0

0
36849
33522
3327
6362
6362
6362

242762232892
9870-134271

0
0
0
30487

II.2.4.4.4 Asset Quality
In 2005, the CBE issued regulation to govern customer credit rate and provision, considered the obligor
rate (ORR), the purpose of the loan, the personal housing loan, and the loans for small and medium
enterprises. Also, in 2008, the CBE issued rules for the preparation and presentation of bank’s financial
statement and the principle of recognition and measurement regarding the provision for impairment
losses based. The following chart shows the beneficiary entities of credit facilities.

122

Figure 42: Bank’s Contingent Liabilities and Loans at End of June 2018.
for medium
sizedenterprises
5.9 %for small sized

for micro
enterprises

enterprises
-

0.7 %

5.1%

Consumption

for corporates

and real estate(
housing)
personal

76.5 %

11.8 %
Source: Central Bank of Egypt

II.2.5 Stock Market
The performance of the Egyptian Exchange (EGX) in FY 2017/2018, marked increases in most of its
indices except for NILEX index. Its benchmark index (EGX 30) rose by 22.0 percent to 16348.6 points
at end of June 2018 during the reporting year. EGX 20 increased by 33.6 percent to 16473.3 points.
EGX 50 EWI -which includes the top 50 companies in terms of liquidity and activity- also picked up by
31.8 percent to 2736.5 points at end of June 2018. Moreover, EGX 70 and EGX 100 went up by 23.9
percent and 36.6 percent to 804.6 points and 2062.1 points, in order. However, NILEX index whichreflects the performance of small and medium-sized enterprises listed on Nile Stock Exchange- declined
by 8.8 percent to 465.0 points at end of June 2018. Concerning the primary market, the number of newissues approved by FRA in FY 2017/2018 reached 6077 issues, with a total value of LE 187.5 billion(against 4411 issues, totaling LE 78.6 billion in the previous FY). Of this figure, issues for new
businesses reached 3825 in number (62.9 percent of total issues), at a total value of LE 35.0 billion.
Adds to this, the number of issues for capital increases of existing companies reached 2252 issues,
totaling LE 152.5 billion (81.4 percent of the total value of issues) during the reporting year. The
following figure shows the Stock Market Indices during period from 2016 to 2018.
Figure 43: Stock Market Indices during period from 2016 to 2018.

Source: Central Bank of Egypt

The trading in the secondary market (including NILEX) in FY 2o17/2018 showed increased in the tradedsecurities by LE 6.9 billion or 2.1 percent recording LE 399.2 billion. More than, the number oftransactions increased by 0.6 million or 8.3 percent posting 7.3 million transactions. In addition,
Foreigner’s transaction on the EGX (purchase and sale) during the year increased by 24.4 percent to LE

123186.6 billion against LE 150.1 billion in the previous year. The following figure illustrates foreign
investor’s transaction during FYs 2016/2017 and 2017/2018
Figure44: The foreign investor’s transaction during FYs 2016/2017 and 2017/2018
LE Bn

Source: central bank of Egypt

II.3 Public Finance
The actual implementation data of fiscal operations of the state budget (administrative system, local
administration, and service authorities) released by the Ministry of Finance for FY 2017/2018
demonstrated that, the overall deficit widened by LE 53.1 billion to stand at LE 432.7 billion (against
LE 379.6 billion in the previous FY). Despite the rise in the budget deficit as an absolute value, its ratio
to GDP fell to 9.8 percent (from10.9 percent). also, the primary surplus reached LE 4.7 billion, against
a primary deficit of LE 63.0 billion in FY 2016/2017.
The achievement of a primary surplus during the year compared to the previous year and thedrop in the overall deficit as a percentage of GDP mirrored the continued positive effects of thecorrective measures taken in the area of public finance under the comprehensive economic reform
program currently adopted by the government. As the country has already freed up $14bn by reforming
energy subsidies which reduced pressure on the national budget and allowed investment in other sectors.
The country has potential huge sector to invest in such as the transport, energy, water and sanitation andagriculture. Also, it is observable the fundamental shift away from the state as provider of employment
and output to the private sector. The following Figure Illustrate Revenues, Expenditure, and Overall
Fiscal Primary Balance as a Percentage of GDP FOR 2015/2016 to 2017/2018.
Figure 45: Revenues, Expenditure, and Overall Fiscal Primary Balance as a Percentage of GDP
FOR 2015/2016 to 2017/2018

Source: Central Bank of Egypt

124

Total revenues registered LE 805.7 billion (18.3 percent of GDP) in FY 2017/2018, against LE 659.2
billion (19.0 percent of GDP) in the previous FY, up by LE 146.5 billion or 22.2 percent. This reflected
the increase in tax revenues by LE 166.1 billion or 35.9 percent to LE 628.1 billion (78.0 percent of
total revenues), and the fall in non-tax revenues by LE 19.6 billion or 9.9 percent to LE 177.6 billion(22.0 percent of total revenues). The following figure illustrates the total revenues during the FYs
2016/2017 and 2017/2018.
Figure 46: Total revenues during the FYs 2016/2017 and 2017/2018.

Source: Central Bank of Egypt

The increase in tax revenues by LE 166.1 billion mainly came as a consequence of the following
developments:
 The increased in the Value-added taxes on goods and services which registered LE 85.2 billion or
40.8 percent, primarily due to the increase in the tax rate on goods and services by one percentage
point, from 13 percent to 14 percent. According to the provisions of Article (3) of Law No. 67 of2016. In addition, the rise in the proceeds from taxes on local & imported goods, services; andstamp duties.
 Taxes on income and capital gains increased by LE 40.0 billion, due to higher proceeds from taxes
on: (1) companies by LE 14.1 billion, (2) salaries by LE 13.4 billion, (3) EGPC by LE 9.5 billion,(4) Suez Canal by LE 6.8 billion. By contrast, proceeds from taxes on profits from the CBE retreatedby LE 3.8 billion.
 Property taxes went up by LE 14.9 billion or 40.5 percent, reflecting the rise in revenues from taxes
on T-bills and bonds payable interest.
 Taxes on international trade (customs) increased by LE 3.2 billion, due to the increase inmerchandise imports by LE 61.0 billion during the reporting year.
The fall in non-tax revenues by LE 19.6 billion was explained by the following developments:
 Property income declined by LE 24.8 billion, as a result of lower transfers from the CBE, Suez
Canal and economic authorities. However, property income from the EGPC and other companies
increased.
 External grants retreated by LE 15.8 billion during the FY.
 On the other hand, the Proceeds from selling goods and services grew by LE 6.6 billion, reflecting
the increase in receipts from special accounts and funds during this year. In addition, the increasein the Financing investments which registered LE 4.1 billion and Other miscellaneous non-tax
revenues picked up by LE 10.3 billion.
Total expenditures reached LE 1229.1 billion (27.9 percent of GDP) in FY 2017/2018, compared with
LE 1031.9 billion (29.7 percent of GDP) in the preceding FY, up by LE 197.2 billion or 19.1 percent
primarily as a result of: The rise in interest payments on domestic and external debts by LE 120.8 billion or 38.1 percent toLE 437.4 billion (against LE 316.6 billion).

125



The subsidies, grants and social benefits scaled up by LE 52.4 billion, mainly as follows: (1)increase Subsidies of supply commodities which rose by LE 41.0 billion, oil subsidy by LE 5.8
billion, and other miscellaneous subsidy items by LE 2.2 billion, (2) the country increased its
contribution in the pension fund and social benefits which moved up by LE 13.6 billion.
 Grants by the government extended to some international institutions, foreign governments andgeneral government entities scaled down by LE 2.2 billion.
 The state workers' wages and compensations increased by LE 11.4 billion or 5.1 percent to stand at
LE 236.9 billion (against LE 225.5 billion).
 The spending on purchases of goods and services are increased by LE 5.4 billion.

The investments of budget sector related entities decreased by LE 3.5 billion (against an increaseof LE 39.8 billion in FY 2016/2017).
Accordingly, the cash deficit of the budget sector reached LE 423.4 billion or 9.6 percent of GDP in FY
2017/2018. The overall deficit (including the net acquisition of financial assets) rose by LE 53.1 billion
to post LE 432.7 billion or 9.8 percent of GDP (against LE 379.6 billion or 10.9 percent of GDP a year
earlier). 53.2 percent of the deficit or LE 230.3 billion was financed by external sources and 40.7 percent
or LE 176.2 billion by local banking sources. The rest was financed by other non-banking local sources
and some local repayments were also made. By adding the fiscal operations of both the NIB and SIFs
to those of the budget sector in FY 2017/18, total collected revenues would grow by LE 110.3 billion to
LE 916.0 billion or 20.8 percent of GDP. Likewise, total expenditures would increase by LE 106.9
billion to LE 1336.0 billion or 30.3 percent of GDP. This resulted in an overall deficit of LE 425.4 billion
or 9.7 percent of GDP in the consolidated fiscal operations of the general government (including net
acquisition of financial assets). The following table illustrate Summary of the Fiscal Operations of the
Budget Sector during the FY 2016/2017 and 2017/2018
Table 19: Summary of the Fiscal Operations of the Budget Sector during the FY 2016/2017 and2017/20182016/17
Total Revenues
Tax revenues

659184462007805741628083

Taxes on income &profits
Taxes on property
Taxes on goods & services

16689736539

20691951353

20862429380934255
15692
197177
95199
38058
27282
17683
18955

37505
38497
17765870317

Taxes on international trade(customs)
Other taxes
Non-tax revenues
Property income
Sales of goods& services
Financing investments Grants
Others
Source: Central Bank of Egypt(LE Mn)2016/172017/18
Total Expenditures
1031941
1229132
Workers' wages&compensation
225513236920Purchases of goods&service
42450
47879
Interest
316602437359Subsidies, grants &social benefits
276719329076
Subsidies
2025592435382017/18

GrantsSocial benefits
OthersOther expenditures

44693 31430
1989
29229

Defense Others

8919
64194
1047
61516
48934
12582
109141

The figure below illustrates the Total Expenditures for FY 2106/2017 and 2017/2018.

126

6713
77751
1074
72314
55002
17312
105584

Figure 47: Total Expenditures for FY 2106/2017 and 2017/2018

Purchases of Non
Financial assets
Investments(

Otherexpenditure
-

5.8 %

Wages &
Compensations of
Employees

19.3 %

8.6 %
5.9%

21.9 %

10.6 %

Purchases of Goods
3.9 %Subsidies,
Grants & Social
Benefits

2016 / 2017
Actual26.8 %& Services

4.1 %

26.8 %
30.7 %

2017 2018/
ActualInterest on Domestic
35.6 %& External Debt

Source: Central Bank of Egypt

II.3.1Domestic Public Debt and External Debt
Domestic public debt includes net debt of the government. Net debt of public economic authorities, andthat of the National Investment Bank (NIB), minus the intra-debt of both public economic authorities
and the government to the NIB.
At end of June 2018, domestic public debt amounted to LE 3696.4 billion (against LE 3160.9 billion
at end of June 2017), recording an increase of LE 535.5 billion or 16.9 percent during FY 2017/2018.
Despite the rise of domestic public debt as an absolute figure, the public debt/GDP ratio deflated to 83.3
percent at end of June 2018 (versus 91.1 percent at end of June 2017). The following figure illustrate
the gross domestic debt at end of June 2018 (LE bn)
Figure 48: Gross Domestic Debt at End of June 2018 (LE bn):

Source: Central Bank of Egypt

II.3.1.1 Net Debt of the Government
Net government domestic debt increased by LE 435.9 billion or 16.2 percent in FY 2017/2018, to LE
3121.8 billion at end of June 2018 (compared with LE 2685.9 billion at end of June 2017). Despite theincrease in the net government domestic debt as an absolute figure, its ratio to GDP decreased to 70.3

127

percent at end of June 2018 (from 77.4 percent at end of June 2017). This was a result of the increase in
the balances of treasury bonds and bills (traceable mainly to the higher balances of TBs) by LE 380.9
billion and the rise of LE 55.5 billion of the government net balances at the banking system (due to theincrease in government loans by LE 31.0 billion and the decline in government deposits by LE 24.5
billion). Add to this the retreat in both the value of the issued Masri Dollar Certificates by LE 0.2 billion
worth and the facilities from SIFs by LE 0.3 billion. The following table shows domestic debt of thegovernment (Net) at Jun 2017and 2018. The following table shows domestic debt of the Government(Net) at June 2017 and 2018.
Table 20: Domestic Debt of the Government (Net) at June 2017 and 2018:
Balances at End ofDomestic Government Debt (Net)
Balances of Bonds & Bills
Bonds, of which,
Tradable on exchanges
Treasury bills
Facilities from SIFs
Masri Dollar Certificates
Net Balances at the Banking System
Credit facilities
Deposits (-)
Net Domestic Government Debt/GDP (%)
Source: Central Bank of Egypt

June 2017
Value%

June 2018
Value%

2685.93024.51838.8747.31185.70.3
0.2-339.1
100.7
439.8

3121.83405.4
1858.3776.8
1547.100-283.6
131.7
415.3

100.0
112.6
68.5
27.8
44.1
0.0
0.0
-12.6
3.7
16.3
77.4

100.0
109.1
59.5
24.9
49.6
0.0
0.0
-9.1
4.2
13.3
70.3

Change+ (-)
2017/2018
435.9
380.9
19.5
29.5
361.4
(0.3)
(0.2)
55.5
31.0
24.5

The increase of LE 380.9 billion in the balance of government bonds and bills was distributed as follows: LE 361.4 billion was in treasury bills (driven by the increase in TBs issued in Egyptian pound by
LE 369.6 billion and those issued in euro by LE 0.4 billion worth, on the one hand, TBs issued in
US dollar was declined by LE 8.6 billion worth.
 LE 19.5 billion was in government bonds, as a combined result of the increase in SIFs’ bonds by
LE 22.2 billion (against the transfer of NIB debt to the public Treasury), the amount of bonds floatedabroad recorded LE 18.0 billion, Treasury bonds by LE 11.4 billion; and the decrease in the balanceof the rest of government bonds by LE 32.1 billion.
II.3.1.2 Net Debt of Public Economic Authorities
During FY 2017/2018, net debt of public economic authorities increased by LE 95.3 billion to LE 317.6
billion at end of June 2018. The rise was resulted from the increase in their net borrowing from thebanking system by LE 75.2 billion (owing to the rise in their claims on the banking system by LE 35.9
billion and the decrease in their deposits therewith by LE 39.3 billion), as well as the rise in theirborrowing from the NIB by LE 20.1 billion.
II.3.1.3 Net Debt of NIB
Net debt of NIB (including intra-debt) mounted to some LE 473.0 billion at end of June 2018, up by LE
136.1 billion in the reporting year. That was resulted from the increase in total resources invested at the
NIB by LE 140.0 billion to LE 484.0 billion and the rise in its deposits at the banking system by LE 3.9billion. The following figure shows the resources of the NIB at the end of June 2018.

128

Figure 49: Resources of the NIB at the end of June 2018.

Source: Central Bank of Egypt

II.3.1.4 Intra-Debt
Intra-debt of public economic authorities and the government to the NIB reached some LE 216.0 billion
at end of June 2018 (against LE 84.3 billion at end of June 2017). NIB's investments in government
securities (bills and bonds) recorded LE 144.3 billion, up by LE 111.7 billion in FY 2017/2018, while
the loans extended by the NIB to these authorities registered LE 71.7 billion, up by LE 20.1 billion.
II.3.1.5 External Debt
External debt reached US$ 92.6 billion at end of June 2018, up by US$ 13.6 billion or 17.2 percent(compared to the end of June 2017). This driven by the rise in net disbursements of loans as well as theappreciation of most currencies of borrowing versus the US dollar. External Debt Structure: The external
debt by original maturity indicated that long- and medium-term debts (guaranteed and non-guaranteed)registered US$ 80.3 billion (86.7 percent of total external debt) at end of June 2018. The long-term debt
made up US$ 69.0 billion (mostly owed to international and regional organizations, non-residents’deposits, and Egyptian bonds and notes), while medium-term debt constituted US$ 11.3 billion. In themeantime, short-term debt stood at US$ 12.3 billion or 13.3 percent of total external debt. The indicatorsshow as compared to peer regional country groups that: The ratio of external debt to GDP reached 37.0
percent at end of June 2018 (65.1 percent was owed to Central and Eastern Europe and 44.7 percent toLatin America and the Caribbean).

129

III.

Tax Structure

The main sources for Egypt’s government revenue are tax as it represents more than 70% of total
revenues. In the recent history. Egypt had launched its first tax low no 14 of 1939, this low imposed
taxes on mobile capitals, revenues commercial and industrial profits and payroll tax. In the meantime,
Egyptian’s government forced another tax low (Low no 114 of 1939) to tax agriculture lands, tax lows
no 44of 1939 of stamp tax, then low no 142 of 144 of inheritance tax and low no 99 of 1949 of generalincome tax.
By the beginning of 1980s, Egypt tried to strengthen its economy and stimulate it by many
ways with long run plans. One of these ways is reform tax system by imposing new tax lows in direct
and indirect taxes such as, new stamp law no 111 of 1980, new income tax law no 157 of 1980 and
replaced by income tax law no 91 of 2005, consumption tax law no 133 of 1981, general sales tax law
no 11 of 1991 and property tax law no 117 of 2008, and replaced by value-add tax law no 67 of 2016. A
country’s tax structure identifies the composition of tax revenues by different tax types, this is an
important indicator since different taxes has different economic and social effects.
The current Egyptian tax structure comprises of both types of taxes, direct taxes and indirect taxes
as follow:
 Income Tax
 Value Add Tax
 Custom Tax
 Property Tax
 Other Taxes
The highest share of tax revenues in Egypt in FY 2017/2018 was contributed by VAT 46.7%. The second
highest share of tax revenue was derived from the income tax 22.7% from total tax revenue. The
following table displays Tax Revenues Growth for FY 2012/13 to 2017/18:
Table 21: Tax Revenue Growth for FY 2012/2013 to 2017/2018(LE Million)
FY
Total Revenues
Total tax revenue
Tax revenue /total revenues
2012/2013
3503222511192013/2014
4567882602892014/2015
465241305957
2015/2016
491488352315
2016/2017
6591844620072017/2018805741
629,302
Source: Egyptian Ministry of Finance

71.7%
57.0%
65.8%
71.7%
70.1%
78.10%

Ministry of Finance carries out the tax laws or amendments or regulation and circulation through its
separated departments to be submitted from the parliaments for ratification. Each department has its
own organization structure, and by law.

Income tax and Value add tax department, this department is responsible of enforcement of income
tax law, general tax sales, stamp and withholding tax.
Custom department is in charge of carrying out the custom tax lawReal state department, this department is in charge of the enforcement of agriculture and building
tax law
All departments are under the direct control and supervision of Ministry of Finance, but the third
department is also having another control from the local government.
III.1 Income Tax
Egypt as some other developing countries, income tax revenue is one of the vital sources of country’s
total revenues. Egypt had launched the income tax law No. 91 for year 2005 in 11 June 2005. It iseffectively starting July 1, 2005 for personal income. The corporate income tax will be effectively

130

starting January 1st 2006.The following table shows income tax revenue compared to total tax revenues
from FY 2012/2013 to 2017/2018:
Table22: income Tax Revenue Growth for FY 2012/2013 to 2017/2018(LE Million)
Fiscal Year
Total tax revenue
2012/20132013/20142014/2015
2015/20162016/20172017/2018
Source: Egyptian Ministry of Finance

Income Tax
251119260289305957352315462007629302

Income Tax/ Total tax revenue
117762120925129818144743
166897207230

46.9%
46.5%
42.4%
41.1%
36.1%
32.9%

The previous table emphasize on the importance role of income tax against all tax revenue; however, it
starts to fall down due to impose of the VAT law on 8th September 2016.
Income tax is levied on the following sources of income:Worldwide income from employment or dependent services by the Egyptian government or any
Egyptian public organization, regardless of the employee’s residence, the place service is renderedor the place of payment.
The source of income from Egypt paid by the Egyptian or foreign firms or by other forms of legal
entities to any worker resident in Egypt or abroad, in return of service rendered in Egypt Nonresident individuals and experts are taxed only on Egyptian-source income
Residence according to Egyptian Tax law, persons who have permanent home in the country and aperson who resides more than 183 days in Egypt during a calendar year is deemed to be resident in
Egypt for the tax purpose.
Income subject to tax on natural persons: income tax is levied on the following types of income:
Employment income
Business profits (which includes income from commercial and industrial activities)

Noncommercial profits
Income from immovable properties
Employment income the tax levied on salaries, wages, compensation award, overtime pay and all inkind fringe benefits.
The following rules apply to the taxation of employment income:Casual workers
Income generated from Egyptian sources
Income generated from foreign sources for work performed in EgyptTax imposed on all salaries and its kinds
Income exempted from tax as follows:Special allowances in-kind for employees (meals distributed to the workers. Transportation cost or
equivalents costs, health care, tools necessary to perform the work)

Workers’ share in the distributed profit to workers according to the low.
All compensation received by member of diplomatic and consular corps, international organization,and other foreign diplomatic representative in the context of their official work.
Business income: income tax levied on the profits of business income from all activities carried on bycommercial and industrial entities operation as sole trader, partnership and limited partnership in Egypt.
The taxable net profit determined on basis of the total profits after taxable commercial and industrial
income consists of net commercial and industrial profit derived within a calendar year from all business
transaction, including sales of assets (after deduction of all business expenses, charges and personal
allowances).
Capital gain on disposition of securities are subject to income tax but in different two situations aspresented below

131



If the securities are unlisted, the tax imposed on the capital gain from the disposal of securities at
the normal tax rate.

If the securities are listed, the capital gains from the disposal of securities or quotas are subject totax at the rate of 10%without no deduction.
Resident individual shareholder who don’t have any other taxable income from commercial or industrial
activities should only be taxed on dividend income exceeding 10,000 EGP.
Non- resident individual shareholders will be subject to a 10% withholding tax on gains realized fromthe sale of Egyptian shares (irrespective of whether the business listed or not). Capital gain derived fromtransfer real estate are not subject to tax unless the real estate is used in trade or business. However, if
the natural person derived capital gains from one transaction of selling urban land or building, he
imposed to 2.5% tax on his gross revenues.
Exemption: Article (31) of law 91 of 2005 introduced exemption permitted under the law as listed
under:

Profits of the land reclamation or cultivation establishment for a period of ten years effective fromthe date of beginning the exercise of the activity.
Profits of establishment of poultry production, bees breeding, cattle breeding and fattening pens,and fisher projects, as well as profits of trawlers projects, for a period of ten years from the date of
beginning the exercise activity.

Return from deposits, savings account in banks and obtain interest from bonds which are issued by
the government in Egypt.
Profits realized from the new projects established by finance from the social fund for development.
Deduction cost: all costs in general is deductible if it documented. In particular, the following specificdeduction are allowed:
Special deduction of workers (employment income) with LE 7000 per annum.
Rent cost of premisesTax depreciation and accelerated depreciation for new machinesSocial insurance contribution and contribution to pensions and savings funds but with limitation of
LE 10000 per annum or 15%of the net income, which is higherInterest on loansSocial insurance premium payable by the owner
Donation to the government or local public units
Donation to non-government entities but limited to 10% of the annual net profit.
Noncommercial profession (self-employment): Income tax is levied on noncommercial profits derived
by professionals or independent person practicing other noncommercial activities in Egypt (lawyer,
accountants, artists, writers, etc.).
Deduction costs: graduates and member of professional association about to practice for the first timeenjoys certain exemption depend on the professional type. Article (33) of the low demonstrates the
deduction cost as follows:Registration fees and its likes

Taxes paid for practicing of the profession
Pension, life and health insurance (limited to LE 3000 per annum)Donation to the government or local public entities

Donation to non- government entities but limited to 10% of the annual net profits
Exemptions:
Revenues from editing and translation books, religious, scientific, etc. except of whom proceeds
profits from the sale of printed work
Revenue resulting from teaching staff from their books
Table 23 shows the tax rates are applied to individual and employment income:132

Table 23: Tax rates applied to individual and employment income(LE)
Taxable income
Zero to 7000
7201 to 30,000
30,001 to 45,000
45,001 to 200,000
More than 200,000
Source: Egyptian Ministry of FinanceTax rate on bracket
Zero%
10.0%
15.0%
20.0%
22.5%

In addition, Discount on the accrued tax is applied for one time according to the highest Tax bracket,
and if the individual taxpayer is taxable to the highest tax brackets, he will not have the discount. Table
24 shows the discount made for the following tax brackets:
Table 24: discount on accrual tax(LE)
Taxable rate on bracket (%)

discount on accrual tax

7201 to 30,000
30,001 to 45,000
45,001 to 200,000
Source: Egyptian Ministry of Finance

80.0%
40.0%
5.0%

The above -mentioned brackets also apply to non-residents on the income they receive from an Egyptiantreasury or against work performed in Egypt.
III.2 Corporate Income Tax
Resident legal entities are subject to corporate tax on their profits derived worldwide. Non-resident
companies are subject to tax only on their profits derived from Egypt. Profits from industrial orcommercial entities are determined based on the revenue resulting from industrial or commercial
transaction.
Rates of corporate income tax. The standard rate of corporate income tax is 22.5%. Exceptions
to the 22.5% rate exist. Oil prospecting and production companies are subject to tax on their profits at a
rate of 40.55%. The Suez Canal Company, the Egyptian General Petroleum Company and the Central
Bank of Egypt are subject to tax on their profits at a rate of 40%.
Legal entities
The following types shall be considered juridical persons:
Association of capital and partnership as well as the corporation de facto:
Cooperative societies and their unions
Public entities and other public juridical persons

Foreign banks, companies and institution even if them headquarter are abroad
Units established by the local government with regard to the taxable activity
Residency
a company considered resident if it is incorporated under Egyptian law or its management and control
is exercised in Egypt such as 50% of director’s are resident, board of directors or manager’s meetings
taking place in Egypt.
Deductible costs
All costs and expenses incurred during the account period according to the accrual basis, the tax law
provided for instance theses expenses (rent, depreciation, accelerated depreciation, social insurance,salaries and wages and other expenses).
Nondeductible costs

133





Financial penalties and fines
Interest on loans and debt paid to tax exempted entities
Interest loans that exceed the double credit and discount rate that the central bank has declared after
the tax period and at the beginning of the calendar year. Also, the maximum debt to equity ratio tobe 4:1 and if the debt exceeds such a ratio, the excess interest is not considered as a reserve.
Provisions and reserves are not considered as deductible costs except for the following:
80% of loan provisions made by banks (required by the central bank of Egypt)Insurance companies’ provisions determined by law No 10 of 198.
Capital gains
Capital gains on the sale of shares (whether the shares listed or not) should be included in the taxable
profits with a credit for withholding tax paid.
Exemptions

10 years exemption for new agriculture and re-cultivation companies from the date of being
considered productive
10 years exemption of new fishing boats organizations, fish farming entities and poultry farming
companies from the date of being considered productiveNonprofit seeking entitiesInterest yielded from securities issued by the central bank of Egypt
When 90% of the dividend income received by any Egyptian resident corporate shareholder will
be exempt from tax if the shareholder holds at least 25% of the share’s capital or the voting rightsof the subsidiary company and the company holds or commits to hold the shares of the subsidiary
for at least two years.
Corporate income tax rate
Tax rate corporate income tax rate generally taxed with 22.5% of the taxable income, special corporate
tax rate for explorations and production of gas and oil companies taxed at 40.55% of taxable income,Suez Canal Authority, the Egyptian Petroleum Authority, and the central bank are taxed at rate of 40%.
Filling tax return
The taxable year is accounting year. Companies must file a tax return within 4 months following the endof the financial year or before the beginning of May (self-assessment is the main base). Tax mainly
assessed on the information provided in the tax return.
III.3 Value Add Tax
A new value Add Tax (VAT) law no.31 was issued on the 8th September 2016, with immediate effect andso abolished the previously existent general sales tax law no.11 of 1991 (GST). The new VAT law differsfrom the abolished GST law as it is applied to a broader range of goods and services, it however exempts
a number of basics goods and services which affects low-income earners (in addition to other exemption
listed within the law). It also introduced the reserve charge mechanism in Egypt for the first time,
whereby transaction involving non-residents providing services/ royalties to Egyptian residents havebecome subject VAT in Egypt.
VAT Rate
The standard VAT rate is 13% for the financial year 2016/2017 (until the 30th of June 2017), as the VAT
rate increased to 14% on the 1st of July 2017, applicable on all goods and services, except for machineryand equipment used for production purposes, which are subject to a 5% VAT (although buses andpassenger cars are subject to different rate). The table below shows taxes on goods and services to total
tax revenues from FY 2012/2013 to 2017/2018:134

Table 25: VAT Tax Revenue Growth for FY 2012/2013 to 2017/2018(LE Million)
Fiscal Year
Total tax revenue
VAT Tax
2012/2013
2511192013/2014
2602892014/2015305957
2015/2016352315
2016/2017
4620072017/2018629,302
Source: Egyptian Ministry of Finance

VAT Tax/ Total tax revenue
92924
91867
122930140525208624294257

37.0%
35.3%
40.2%
39.9%
45.2%
46.7%

Registration requirements:
Business registered under the GST law will automatically be considered registered for VAT
purposes, provide their annual turnover exceeds the new registration threshold of EGP 500,000Importers of taxable goods registered under the abolished GST law will automatically be consideredregistered, for VAT purposes regardless of their turnoverBusiness not required to register under the GST law and that are required to register for VAT
purpose under the new law, must apply to The Egyptian Tax Authority (ETA) for their VAT
registration, with on thirty days from the date of reaching the VAT registration threshold.
Business currently registered under the GST law with a turnover below the new VAT threshold shallbe deregistered automatically, unless they specially request to remain registered within 30 days
from the effective date of the new law.
Tax return:The return shall be filled by the registered taxpayer (self – assessment is the main base) and must be
submitted monthly. The e-filling has introduced by the ETA for the submission of the VAT return
electronically through the ETA’s website. The e-filling system will be effective starting from January
2019. Accordingly, the manual filing of VAT returns will not be acceptable as latter of the date mentioned.
III.4 Custom taxes
Custom and other import duties are all levies collected on goods that are entering the country or services
delivered by non-residents to residents. They include levies imposed for revenue or protection purposesand determined on a specific or ad valorem basis as long as they are restricted to imported goods orservices. The table below shows taxes on international trade (custom) to total tax revenue from FY
2012/2013 to 2017/2018
Table 26: Custom Tax revenue Growth for FY 2012/2013 to 2017/2018(LE Million)
Fiscal Year
Total tax revenue
2511192012/20132013/2014
260289305957
2014/2015
2015/2016352315462007
2016/20172017/2018629,302
Source: Egyptian Ministry of Finance

Custom Tax
16771
17673
21867

Custom Tax/ Total tax revenue
6.7%
6.8%
7.1%

28091
34255
37505

8.0%
7.4%
5.9%

Egyptian’s present custom law no. 66/ 1963 amended by law no. 95/2005 and enacted in 2006. Tariff
policies in Egypt are formulated by the ministry of finance and implemented by the custom. Egypt
adopts a port-oriented management mode, checking and inspecting exports and imports directly byhuman focusing and other resources at the passageways there. Under the current custom law, taxes leviedbasically on and ad valorem basis.
In general, exports goods are exempted from custom taxes and with some exception of imports in certain
circumstances such as: exported commodities, imported raw materials which used in local productionand exported and free zone areas

135

Egypt’s tariff rates mostly between 2% and 40% regarded to the agreement and cooperation withinternational monetary fund (IMF) and World Bank.
III.5 Real Estate Property Tax
Tax is levied on the revenue wealth includes revenue from exploitation of building and furnished units.
This tax applies to all properties established on Egyptian land other than the non-taxable properties,
whether rented or occupied by the owner himself who is the taxpayer, whether they are finished andinhabited, finished and uninhabited or inhabited and unfinished. This means that all current establishedproperties are taxable, whether established villas, buildings, floating houses or chalets whatever theirlocations are. The following table showed tax on property (real estate) to total tax revenues from FY
2012/2013 to FY 2017/2018:
Table27: Property Tax Revenue Growth for FY 2012/2013 to 2017/2018
Fiscal Year

Total tax revenue
2511192012/20132013/2014
260289305957
2014/2015
2015/2016352315462007
2016/20172017/2018629,302
Source: Egyptian Ministry of Finance

Property Tax
16453(LE Million)
Property Tax/ Total tax revenue
6.6%

18761
21107
27990
36539
51410

7.2%
6.9%
7.9%
7.9%
8.2%

In determining the taxable revenues yields from real estate, there are two methods, the first method is
estimating (the estimation guided by low no. 113 of 1939) and the second depends on the actual properaccounting books. Estimating method uses the following computing methods:
Net revenues from horticulture corps and from productive orchards are estimated according to thefollowing conditions; If the land is leased, the taxable revenue will equal net value estimated after
deducting 20% for all expenses, or If the land is owned, the taxable revenue will equal twice therent value after deducting 20% for all expenses.

Net revenue from constructed real estate are determined on the rent (estimation according to thetax imposed by law no.196 of 2008)

Net revenue results from furnished units (actual rent value) after deducting 50% for all expenses
Tax filling and payment procedures:
Individuals who derived revenues from commercial, noncommercial and real estate must submit
the annual tax return (self-assessment is the main base)
The tax year is the normal calendar year. The tax returns must be filled before the 1st April nonfilers taxpayers and filers after the due date pay 2% of the delayed amount plus the credit anddiscount rate set each January by the Central Bank of Egypt. In addition, non-fillers are imposed toa penalty from LE 5000 to 20000.

Individual must notify the tax authority about their new business or professional activities within
30 days of starting such activities

The tax return must give details of profits or losses, and must be supported by the relevant booksof account and documentsIndividual taxpayers may request to extend the submission date (up to 60 days)
Employees are not required to submit annual returns for the employment incomeCompanies must withhold salaries tax on a monthly basis and remit such amounts to the tax
authorities quarterly
Taxes become due within 30 days after receipt of notice of final tax assessment for the tax
authorities.

136

Tax Assessment
Tax is assessed on the return’s taxable income which determined and computed by each taxpayer. The
tax authority may amend or estimate the tax due depending on additional information or data did notincluded in the taxpayer’s annual return.
Tax authority may amend an assessment within 5 years from the legal deadline for submitting the return
and within 6 years if the taxpayer evaded the tax.
III.6 Stamp Taxes
Egyptian current stamp tax law no. 111/1980 and its amends. The stamp taxes levied on legal documents
deeds, banking transactions, company formation, insurance premiums and other transactions.
The tax rate differs according to the type of document and the value of the transaction as follows:▪
A document such as contracts, the tax is LE 0.9 for each paper▪
% stamp tax is levied based on the value of the transaction▪
An annual proportional tax at the rate of 0.4% is imposed on the highest debit balance in eachquarter or credit facility and loans and advances provided by Egyptian Banks or branches of foreignbanks during the financial year. The bank and the customer each bear half of the tax▪
Stamp tax is imposed on advertising at the rate of 20%.
III.7 Social Insurance
Employees must pay social insurance contribution to the social insurance authority: employers must
deduct the amount of the social insurance from the employee’s salaries and wages on a monthly basis
economy.
The social contribution of the employees is 14% of the basic salary up to LE 987.5 per monthand by 11% of the variable payments (bonuses and incentives) up to LE 1,590 per month. The social
contribution of the employer is 26% of the basic salary (up to EGP 1,012.50) and 24% of the variablesalary (up to EGP 1,590).
III.8 International Tax
The Egyptian tax law 91 that was issued in 2005 set a regulation for the international transaction which
conducted among Egypt and the cross-border countries. The law contained articles for defining theresident (Article 2), permanent establishment (Article 4), related person (Article 30), royalties, interestand service fees covered by (Article 56), Neutral person (Article 1). In addition, the international tax
law combined with the tax law are the basic laws to prevent the double taxation and define the legal
parameter of within which countries can exercise sovereignty to impose taxes. Egypt has concluded
over 50 bilateral tax treaties. On 7 June 2017, Egypt and 67 other jurisdictions signed the Multilateral
Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the MLI) during a signingceremony hosted by the Organization for Economic Co-operation and Development (OECD) in Paris.
At the time of signature, Egypt submitted a list of 56 tax treaties entered into by Egypt and otherjurisdictions that Egypt would like to designate as Covered Tax Agreements (CTAs), i.e., tax treaties tobe amended through the MLI. Together with the list of CTAs, Egypt also submitted a provisional list ofreservations and notifications (MLI positions) in respect of the various provisions of the MLI. The
definitive MLI positions will be provided upon the deposit of its instrument of ratification, acceptanceor approval of the MLI. The table below shows come of the Egypt’s tax treaties network:

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Table 28: Some of Egypt’s bilateral tax treaty network
Albania
Algeria
Austria
Bahrain
BelarusBelgium
Bulgaria
CanadaChina
CyprusCzech Republic
Denmark
Finland

Iraq
Ireland
Italy
Japan
JordanKorea
KuwaitLebanon
Libya
Macedonia
Malaysia
Malta
Mauritius

PolandRomania
RussiaSerbia & Montenegro
Singapore
South Africa
Spain
Sudan
SwedenSwitzerland
Syria
Tunisia
TurkeyFranceGeorgia

MoroccoNetherlands

UkraineUnited Arab Emirates

India
Indonesia
Pakistan
Palestinian Territories
Yemen
Hungary
Oman
United States

Germany
NorwayUnited Kingdom
Source: pwc.com/ID/Egypt-Individual-Foreign-tax-relief-and-tax-treaties

III.8.1 Transfer priceOn 21 October 2018, Egypt’s Ministry of Finance issued Ministerial Decree No. 547 of 2018 (Decree
No. 547), providing the authority for new transfer pricing guidelines to be published. On 23 October
2018, the Egyptian Tax Authority (ETA) published the new guidelines on its website. The guidelines
introduce new tax compliance requirements. For the year ending 31 December 2018 as following:▪
A taxpayer engaged in cross-border transactions with related parties is expected to prepare local
transfer pricing documentation and submit it to the ETA within two months following the filing of
the 2018 corporate tax return (i.e., 30 June 2019 if the return is filed by the statutory deadline).
▪
An Egyptian parent company of a multinational group with consolidated group revenue of at least
EGP3b (€148m) will have to file a country-by-country (CbC) report (CbCR) in Egypt by
31 December 2019. The new rules may also affect the group’s filing and notification requirements
in other countries.
▪
An Egyptian parent company will also need to prepare a transfer pricing master file that the parent
company and group members will use to support transfer pricing compliance requirements aroundthe world.
If a taxpayer does not submit adequate transfer pricing documentation, the guidelines indicate that the
ETA is likely to treat the taxpayer as a high tax risk, increasing the likelihood of audit and a transfer
pricing adjustment. As this could also shift the burden of proof to the taxpayer to disprove the ETA’s
assessment position, taxpayers with cross-border related party transactions should review the new
guidelines and ensure they can produce adequate transfer pricing documentation for the current fiscal
year by 30 June 2019.
According to the Egyptian tax law, it is possible to enter into arrangement in advance with the tax
department regarding a transfer pricing policy (advance price agreement (APA)). APA ensure that TP
will not be challenged after the tax return is submitted and, accordingly, eliminates exposure to penalties
and interest on the late payment of taxes resulting from adjustment of TP.
III.9 Incentive for foreign investors
Anew investment law was issued on 31 May 2017, abolishing the current law and introducing new
incentives for investors. The executive regulation followed on 28 October 2017. The new law is now inforce and include notable amendment such as returning back the private free zone which was previously
abolished, moreover it provides several incentives such as tax exemption, unified customs rate and freelands. It also focuses on simplifying the incorporation procedures through electronic system. Egyptian
government has become more attune to their benefits in recent years as free zone typically help
economies by establishing export-oriented industries, attracting modern technology, providing
employment opportunities and maximizing foreign currency such as customs and tax exemptions.

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The general incentives granted by the law:▪
Companies shareholder’s & founder &establishment owners are granted investors’ residency for aperiod of one year at least (to be renewed for five years) and not exceeding the project duration.
▪
Goods exported abroad or imported by free zones projects to exercise their activities shall not
subject to import or export rules, or custom procedures related to export and imports, they shallalso not be subject to custom taxes, VAT or any other taxes or duties.
▪
The companies established under this law are exempted from the stamp tax and authentication andpublishing fees for 5 years from the date of registration, moreover the land contracts of the projects
are exempted from registration fees.
▪
A fixed custom rate (2%) will be collected in any imported equipment necessary for establishing
the project▪
The foreign employees in the investment projects can reach up to 20% of the total workforce.
A special incentive:
30% or 50% discount (according to the geographical area of the project) on the investment costs, notingthat the discount will be for a period not exceeding 7 years from the date of initiating the activity anddiscount value shall not exceed 80% of the paid-up capital of the project at the date of initiating theactivity.
III.10 Thin Capitalization
The debt to equity ratio applies is 4:1. The tax deduction of any interest exceeded this ratio is disallowed.
The deduction also disallowed for interest paid which exceeds twice the credit and discount rate(announced by the Central Bank at the beginning of each calendar year). In addition, the interest rate
must be at the Arm’s Length Principle and should be supported by proper transfer pricing documentation.
III.11 Controlled Foreign companies (CFC)
Income from investment in nonresident companies is recognized under the equity method of revenue
recognition and is taxed in Egypt when the following conditions are met simultaneously: first, The
Egyptian entity owns more than 10% of the nonresident company. Second, more than 70% of thenonresident company’s income is derived from dividends, royalties, interest, management fees or rental
fees ` passive income`. Third, the profit of the nonresident company is not subject in its country ofresidence, as the nonresident’s profits are exempted or subject to a tax rate of less than 75% of thecorporate tax rate in Egypt.
III.12 General Anti Avoidance Rules (GAAR)The GAAR was introduced in 2014. The primary objective of this rule is to deter and prevent the
taxpayer from entering into arrangement for the purpose of obtaining an abusive tax advantage. The
GAAR gives the tax authority the right to challenge any case where the main objective of the transaction
is to deter, reduce or avoid paying taxes and would have the right to reassess the taxes due.
III.13 Base Erosion and profit shifting (BEPS)
Egypt joined the BEPS project which was launched by the member states of the OECD and the G20
countries. This initiative is aimed at stopping multinational companies from avoiding, evading taxes andtargets the situations which may result in aggressive tax planning or evasion. Egypt signed theMultilateral Instrument Agreement with the BEPS member countries and should start implementing it
soon. The implementation will start with the four minimum standard action to cope with changes being
introduced to the tax environment.
III.14 Withholding tax

139Onshore, a withholding tax, also called a retention tax, is a legal requirement for the payer of an item ofincome to withhold or deduct tax from the payment, and pay that tax to the government instead. In Egypt,withholding on local payment of a value more than EGP 300 (per invoice) will be applicable, the amountof which will vary depending on the type of activity as follow:▪
Supplies/ contracts 0.5%▪
Services 2%▪
Professional fees (individual) and commissions 5%
Offshore, for payment made to non-resident for services performed in or outside the country, a standard
rate of tax is charged is 20% and is applicable to the following:▪
Interests, the government, public entities, public sector companies and private sectors with loan nomore than three years will exempt from the withholding tax.
▪
Royalties▪
Service charge but there are some services which the withholding tax to non- resident is notapplicable such as (transportation, shipping, insurance, training, participation in conferences andexhibition, direct advertising campaign and others).
III.15The audit cycle proceeds as follows:
Inspection: The tax authority inspects the company based on its documents and records in order to assess
the total tax due on the company and determines the difference in tax due as per the company declarationand the tax authority assessment. The authority issues an assessment including the total tax due on thecompany. If the company objects to the inspection result, the dispute is transferred to the InternalCommittee.
▪
Internal Committee: The dispute is transferred to the Internal Committee to discuss the dispute
points that arose from the inspection further to issue a modified assessment based on its opinion. If
the company objects to the Internal Committee result, the dispute is transferred to the Appeal
Committee to review the dispute points arising from the Internal Committee.
▪
Appeal Committee: The Appeal Committee’s decision is final and binding on the company and thetax department unless a case is appealed by either of them at the court within 30 days of receiving
the decision.
▪
Court: If the decision of the Appeal Committee is not satisfactory for either party, the case will betransferred to the court system, which is considered the final stage of the disputes. Normally, thecourt will appoint an expert witness to investigate the case and prepare a report. The court processusually takes a long period of time.
Statute of limitations: The statute of limitations is five years according to the Egyptian Income Tax Law
and is extended to be seven years in case of tax evasion.
III.16 E-filling and E-payment
The ETA has introduced the e-filling for the submission of the VAT return electronically through the
ETA’s website. The e-filling system will be effective starting from January 2019. Accordingly, themanual filing of VAT returns will not be acceptable as latter of the date mentioned. More than, theelectronic filling of income tax return has become mandatory. As the taxpayer will be required to registeron the ETA’s website to create an account as well as specific code. Upon submission of the tax return,the taxpayer can pay the tax due through on of the following methods: first, using bank transfer throughthe taxpayer’s own bank, or using smart card to pay the tax due, or through the banks or the National
post Authority with which the ETA has specific agreements. On the other hand, for the individual
taxpayers, they still have option to pay their taxes due, electronically or manually.
III.17 Penalties
There are many penalties apply such as, the failure to apply the system of withholding, collection andremittance of tax, failure to file a return and other. For the penalty that imposed when the amount of140

taxes disclosed in the tax return are less than the final assessed tax amount, the penalty imposed
categorized based on the difference between the amounts included in the return and those in theassessment. The rate is 5% if the difference ranges from 10% to 20%, 15% if the difference above 20%
and up to 50%, and 40% if the difference exceeds 50%. Interest is calculated 2% above the annual credit
and discount rate by the central bank.

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IV.

Country Specific Fiscal Issues

Prior to the reform program, Egypt implemented inconsistent macroeconomic policies which, by 2016,
had led to a build-up of significant imbalances. Large budget deficits, loose monetary policy, and a fixedexchange rate had resulted in a drastic reduction in foreign exchange reserves, high inflation, andunsustainably high levels of public debt. Growth had fallen and unemployment increased, especiallyamong women and youth. The program’s immediate priority was to address these issues, restore
macroeconomic stability, and avoid a crisis.
IV.1 Exchange Rate
On the 3rd of November 2016, the CBE took the decision of the liberalization of the Egyptian pound
exchange rate, to be quoted according to the dynamics of supply and demand. This decision came aspart of the economic reform program and this led to greater transparency and foreign exchange liquidity
through attracting greater investment and the correction of assets prices. Also led to restored equilibriumin the foreign exchange market, and eliminated the shortage of foreign exchange. As a result of thispolicy, the Egyptian pound appreciated against US dollar and moved from 7.7 LE per 1$ to be 17.8 LE
per 1$. Banks’ foreign currency resources reached US$ 63.7 billion in FY 2017/2018 (of which US$ 45.2
billion, or 71.0 percent of the total, were customers' sales and US$ 18.5 billion, or 29.0 percent of thetotal, were investment inflows), against US$ 36.1 billion in FY 2016/2017 (of which US$ 24.4 billion,
or 67.6 percent of the total, were customers' sales and US$ 11.7 billion, or 32.4 percent of the total, were
investment inflows).
IV.2 Inflation
The annual headline CPI (urban) picked up by 14.4 percent at the end of FY 2017/2018 (June/June),against a pickup of 29.8 percent at the end of the previous FY. Also tightened monetary policy by raisinginterest rates. These were critical measures to reduce public debt as a share of GDP and limit inflation.
IV.3 Public Debt and Budget Deficit
Placing public debt on a clearly declining path has been one of the main objectives of the authorities’
program. Recovery in GDP growth rates and significant reduction in fiscal deficits have helped to reducegross government debt from more than 100 percent of GDP in 2016/17 to 85 percent of GDP in 2018/19.
This is a significant accomplishment. However, the debt level remains high and needs to be reduced
further to strengthen Egypt’s debt sustainability, reduce interest payments and thereby free up fiscal
space for critical spending needs in health, education, infrastructure and social protection. The
authorities’ intention to maintain primary fiscal surpluses (i.e. fiscal balances excluding interest
payments) at 2 percent of GDP in the medium term would ensure a stable decline in public debt tosustainable levels.
The ratio of external debt to GDP reached 37.0 percent at end of June 2018 (65.1 percent was owed
to Central and Eastern Europe and 44.7 percent to Latin America and the Caribbean).
IIV.4 Other Macro Economic Issues
Another important component of the authorities’ program was to address extensive fuel subsidies, whichwere a significant drain on the budget. These subsidies made fuel in Egypt one of the cheapest in theworld, encouraging excessive consumption and benefiting the well-off far more than the poor because
those with means consumed more. Phasing out fuel subsidies created more room in the budget for bettertargeted social spending, as well as more investment in health, education, and public infrastructure.
The fuel subsidy reform gets the prices right, because when prices start reflecting costs, theeconomy improves by allocating resources more efficiently. Getting relative prices to reflect costs steers
more private investment into sectors that create more jobs, rather than capital-intensive sectors that142

produce relatively fewer jobs but take advantage of fuel subsidies. Other changes, including increasing
competitiveness, reforming public procurement, and increasing transparency of state-owned enterprises
will help improve the effectiveness and efficiency of government. These efforts will also modernize theeconomy so that Egypt can become a bigger player in the global trading system—with the opportunity
to take advantage of global and not just domestic growth. On the fiscal side, the country is seeking to
reprioritizing and rationalizing its expenditure in addition to raising revenues. As the program
implemented aims to decrease public state wages, eliminate the energy subsidies, improve the quality
and targeting of social spending. The value added tax has with high rates and broader coverage adopted
to increase tax revenue. The reform is targeted specific sector. Which stared with the energy sector andintended to extend to the health and the transportation sector. Also, the government has initiative toimprove SOEs’ governance, transparency and accountability by publishing report on state- owned
enterprises, including their financial performance, activities, ownership, organization structure, andaudited report. More than, the authorities implemented structural reforms to improve businessenvironment. As recently, they enacted new industrial license law which aims facilitate procedure.

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V.

Conclusion where we stand and where we go?

Egypt’s reform program supported by the IMF Extended Fund Facility (EFF) has made substantial
progress as evident in the success achieved in macroeconomic stabilization and the recovery of growth.
Economic growth has been steadily improving since the beginning of the reforms, and at [5.5percent] is among the highest in the region. At the same time, the budget for the 2018/19 fiscal year
reached a primary surplus of 2 percent of GDP, which excludes interest payments; and inflation is on
track to reach single digits by the end of 2019. Unemployment has declined to around [8 percent], whichis the lowest in 20 years, and social protection measures have been expanded. These are considerable
achievements.
Ensuring that the current cushion of foreign exchange reserves is preserved by maintaining aflexible exchange rate. Inflation should remain on the decline, along with public debt, which would
create more room for investment in health, education and public infrastructure. The broader goal of thesereforms is to ensure that the economy becomes increasingly market-oriented, where the role of the state
becomes more of a facilitator rather than as a driver of growth. Indeed, Egypt needs at least 700,000
new jobs annually to absorb its young and growing population, and that can only come from the private
sector.
Egypt needs to continue to press ahead with reforms to support private sector development and job
creation. Significant steps have been taken to strengthen governance and competition, better integrate
women and youth in the labor market, improve access to finance and land, and limit the role of the statein the economy. Continued efforts will be needed to deepen and broaden reforms to further improve thebusiness climate, tackle corruption, reduce the role of the state, enhance non-oil exports, enhanced
productivity on the national level and continued investment in and upgrading of infrastructure.
More than, Egypt seeks to develop the country’s human resources supported by increased spendingon health, enhance the education system, increase spending on the research and development (up to atleast 10% of GDP) which become mandated by the Constitution.
As the fiscal deficit increase, the government is trying to increase the tax revenues by increasing
international tax revenues as now we are seeking to impose tax on digital economy through advertisingand digital platform and increase TP revenue, also the government are developing now the electronicsystem(electronic filling, electronic invoice, electronic payments, starts dealing with unified tax
registration number, and replacing all tax file numbers, comes with ongoing process of modernizationof tax data.
In addition, there is new draft law on the development of small medium enterprises include many tax
and non- tax incentives to support this vital sector (simplified tax system to reduce tax burden andfacilitate procedures). For increasing the Tax revenue from the large informal sector in Egypt which ismessing and can lead to increase in the tax revenue and increase in the compliance of the taxpayer.
Egypt need to spend more on education and health and attract the private sector finance forcontributing in the infrastructure development. As using private sector finance, management expertiseand innovation in many sectors could help in convert the public sector resources for where they need
most.
Recently, the Egyptian Tax Authority is seeking to modernize tax administration with developing
fully integrated IT system. As income taxes and VAT will be administrated in a single integratedorganization structure. Automation ETA will enhance the quality of the services provided and safe timeand cost.

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