CENTRAL BANK OF EGYPT

Transcription

1 CENTRAL BANK OF EGYPT ECONOMIC REVIEW Vol. 57 No /2017 Economic Research Sector

2 The Economic Review is issued by the Economic Research Sector at the Central Bank of Egypt (CBE) in Arabic and English languages. It aims to review the performance of the Egyptian economy during the reporting period.

3 Contents Main Macroeconomic Indicators Page 1- Macroeconomic Developments 1/1 - Gross Domestic Product (GDP).. 1 1/2 - Labor Force, Employment and Unemployment /3 - Inflation. 6 1/4 - Tourism Monetary and Banking Developments 2/1- Monetary and Banking Policy and Monetary Aggregates 14 2/1/1- Monetary Policy 14 2/1/2- Reserve Money (M 0 ). 17 2/1/3- Domestic Liquidity (M 2 ) and Counterpart Assets /1/4- Payment Systems and Information Technology (IT). 24 2/1/5- RTGS and SWIFT Local Services. 27 2/2- Banking and Credit Developments /2/1- Supervision Sector 29 2/2/2- Overview of the Aggregate Financial Position of Banks. 33 2/2/3- Interbank Transactions /2/3/1- Transactions with Banks Abroad. 35 2/2/3/2- Interbank Transactions in Egypt /2/4- Deposits 36 2/2/5- Lending Activity Non-Banking Financial Sector 3/1- Stock Market /2- Mutual Funds Public Finance and Domestic Public Debt 4/1- Fiscal Operations of the State Budget /2- Domestic Public Debt /2/1- Net Debt of the Government /2/2- Net Debt of Public Economic Authorities 55 4/2/3- Net Debt of the NIB /2/4- Intra-Debt 55

4 5 - External Transactions 5/1- Foreign Exchange Market and NIRs /2- Balance of Payments 58 5/2/1- Current Account /2/1/1- Trade Balance. 60 5/2/1/2- Balance of Services /2/1/3- Investment Income Balance /2/1/4- Net Unrequited Current Transfers /2/2- Capital and Financial Account. 65 5/3 - Foreign Trade. 68 5/3/1- Structure of Export Proceeds and Import Payments 68 5/3/2- Sectoral Distribution of Merchandise Transactions 71 5/3/3- Geographical Distribution of Merchandise Transactions 73 5/3/4- Breakdown of Trade by Main Merchandise Group. 75 5/4- International Finance 76 5/4/1- Foreign Direct Investment (FDI) in Egypt 77 5/4/2- External Official Grants /4/3- External Debt Annex Statistical Section.. 85

5 Main Macroeconomic Indicators GDP (LE bn) July/Sept. 2015/ /2017 Real GDP at Factor Cost Annual Growth Rate (%) Real GDP at Market Prices Annual Growth Rate (%) GDP at Current Market Prices Annual Growth Rate (%) Real GDP Growth Rate ( at Factor Cost) by Sector (%) A) Commodity Sectors, of which: Agriculture, Forests and Fishing Extractions Manufacturing Construction & Building B) Productive and Social Services Sectors, of which: Wholesale and Retail Trade Tourism Real Estate General Government Social Services Price Indices (%) July/Sept. 2015/ /2017 Rate of change in Consumer Price Index (urban) (January 2010=100) Rate of change in Producer Price Index (2004/2005=100)

6 Monetary and Credit Developments July/Sept. 2015/ /2017 End of Period Growth rate of domestic liquidity (M 2 ) % Growth rate of time and saving deposits in local currency % Growth rate of deposits in foreign currencies % Foreign currency deposits/total deposits (dollarization rate) % Credit to the private business sector/total credit % Net claims on the government/total credit % Credit to the household sector/total credit % Credit to the public business sector/total credit % Change in credit to the private business sector/change in total credit % Change in net claims on the government/change in total credit % Change in credit to the household sector/change in total credit % Change in credit to the public business sector/change in total credit % Loans/Deposits with banks % Investment in securities, TBs and equity participations/deposits % Net international reserves (US$ mn) at the end of the period Number of months of merchandise imports covered by NIR Annual Discount and Interest Rates (%) July/Sept. 2015/ /2017 End of Period CBE Lending and Discount Rate Interest Rates on Main Operations at the CBE * Deposit Acceptance Operations at the CBE (7-days) * According to the MPC press release dated 21/3/2013, the CBE main operations would be Repos or deposit auctions, depending on the prevailing market liquidity conditions.

7 Overnight Deposit and Lending Rates at the CBE Deposit Lending Deposits of More than One Month and Less than or equal to Three Months One Year or Less Loans US Dollar Exchange Rate Announced by the CBE LE/Dollar Buy and Sell Exchange Rates (Average of the Period) End of the Period (Buy Rate) Consolidated Fiscal Operations of the General Government (Budget Sector) (Actual) July/Sept. 2015/ /2017 (LE bn) Total Revenues Total Expenditures Cash Deficit/Surplus Net Acquisition of Financial Assets Overall Deficit/ Surplus Total Finance Domestic Finance Banking Non-Banking External Borrowing Others Revaluation Differences Net Privatization Proceeds Difference between TBs Face and Present Value Discrepancy Cash Deficit (Surplus) / GDP (%) Overall Deficit (Surplus) / GDP (%) Revenues / GDP (%) Expenditures / GDP (%) Not Available

8 Domestic Public Debt End of June 2016 Sept (LE bn) Gross, due on: Government (net) Public Economic Authorities (net) NIB, Minus Intra-Debt (net) External Debt End of June 2016 Sept Gross External Debt (US$ bn) External Debt/GDP % Long-& Medium-term Debt/ External debt Balance of Payments (US$ bn) July/Sept. 2015/ /2017 Current Account (4.0) (5.0) Trade Balance (10.0) (8.7) Merchandise Exports Oil and its Products % Others % Merchandise Imports Intermediate Goods % Investment Goods% Consumer Goods % Fuel, Raw Materials and Others % Services Balance Receipts, of which: Transportation % Travel % Payments, of which: Transportation % Travel % Investment Income Balance (1.1) (1.1) Receipts % Payments % Current Transfers Official % Private % Capital and Financial Account Overall Surplus/(Deficit) (3.7) 1.9

9 1/1- Gross Domestic Product (GDP) Macroeconomic Developments According to the data issued by the Ministry of Planning, Monitoring and Administrative Reform 1, real GDP growth at factor cost slackened to 1.7 percent during Q1 of FY 2016/2017 from 3.1 percent in the corresponding quarter a year earlier. Likewise, real GDP at market prices scaled down from 5.1 percent to 3.4 percent. Real GDP Value (in LE bn) Rate of Change (%) Q1 Q1 2015/ / / /17 Real GDP at factor cost Indirect taxes (net) Real GDP at market prices Source: Table (1/1) in the Statistical Annex. The base year is 2011/2012. % / / / / / July/Sept. Oct./Dec. Developments In Rates Of Change In Real GDP (At Factor Cost) 5.2 Jan./Mar Apr./June July/Sept. Oct./Dec. Jan./Mar. Apr./June July/Sept. Oct./Dec. Jan./Mar Apr./June July/Sept. Oct./Dec Jan./Mar. Apr./June July/Sept Oct./Dec. Jan./Mar. Apr./June 2016/17 July/Sept. 2011/ / / / / The Ministry of Planning, Monitoring, and Administrative Reform revised GDP estimates based on the economic census for FY 2012/13 that was issued by the CAPMAS in December 2014 for the first time after a halt of 15 years. The economic census results helped to cover a larger number of enterprises as well as enabled access to new and actual sources of data. This, in turn, helped improve the estimates of the size of the informal sector. The results were also used to revise the GDP series for 2011/ /2015.

10 -2- GDP (at factor cost and 2011/2012 prices) On the supply side, real GDP at factor cost slowed down to only 1.7 percent during Q1 of FY 2016/2017, compared with 3.1 percent in the previous corresponding period. This was attributed to the lower contributions of tourism (-0.9 point against -0.2 point); the general government (0.5 point against 0.9 point); electricity (nil against 0.2 point); extractions (-0.4 point against -0.3 point); and Suez Canal (nil against 0.1 point). Add to this the higher contribution of communications sector to 0.3 point against 0.2 point. Meanwhile, the contributions of other sectors combined remained unchanged at 2.2 points % 3.0 Agriculture, Forests & Fishing Extractions Manufacturing Electricity Rates Of Change In Real GDP during July/Sept. (Annual Basis) Water, Sanitation & Recycling Construction & Building Transportation & Storage Communications Information -1.8 Suez Canal Wholesale & Retail Trade 2016/ /2016 Finance Social Insurance & Insurance Tourism Real Estate General Government Social Services As regards the private and public sectors' contributions to real GDP growth (1.74 percent) in Q1 of FY 2016/17, the former accounted for the largest share (1.66 percentage point) which is lower than that recorded in Q1 2015/16 (1.8 point). This came primarily as a combined result of the lower contribution of tourism sector (-0.9 point against -0.2 point) and the higher contribution of manufacturing sector (0.2 point against -0.4 point). Moreover, the contributions of other sectors combined remained unchanged at 2.4 percentage points in the period under review. On the other hand, the share of public sector in real GDP growth significantly decreased to 0.08 percentage point (against 1.29 point). This was mainly ascribed to the decline in the contributions of the manufacturing sector (-0.5 point against 0.1 point); the general government (0.5 point against 0.9 point); extractions (-0.3 point against -0.2 point); and Suez Canal (nil against 0.1 point). Meanwhile, the contributions of other sectors combined remained unchanged at 0.4 percentage point.

11 -3- GDP by Expenditure (at 2011/2012 market prices) On the demand side, the domestic demand (consumption and investment) continued to have the lion's share in real GDP growth at market prices (3.4 percent) in Q1 2016/17. Its contribution amounted to 3.8 points (against 7.2 points in the same quarter a year earlier). Meanwhile, the share of external demand (exports of goods and services less imports of goods and services) stood at negative 0.4 percentage point (against negative 2.1 points), as imports increased by 2.5 percent, outpacing as such the rise in exports (only 0.63 percent). (Percentage point) Contributions of Demand Side Categories in Real GDP Growth (at market price) July/Sept. 2015/2016 July/Sept. 2016/2017 Net Exports Capital Formation Final Consumption Real Growth Rate The share of domestic demand (3.8 percentage points) was due to the contributions of both final consumption (government and private) that registered 2.0 percentage points (against 6.2 points) and capital formation (including change in stock) that reached 1.8 point (against 1.0 point). Total investments (at current prices) augmented by 25.5 percent during Q1 of FY 2016/2017 (against 20.7 percent a year earlier), to register LE 98.0 billion (against LE 78.1 billion). The private sector implemented 69.2 percent of the total (against 65.7 percent), whereas the public sector implemented 30.8 percent (against 34.3 percent).

12 -4- The relative distribution of total investments indicates that productive services (transportation and storage; communications; information; Suez Canal; wholesale and retail trade; financial intermediation; social insurance and solidarity; and tourism) accounted for 29 percent; real estate (20.3 percent); extractions (15.4 percent); social services (education, health, and sanitation) (13.6 percent); and manufacturing (10 percent). Moreover, the contributions of agriculture, irrigation, reclamation; electricity; water and construction & building combined remained almost unchanged at 11.7 percent. Growth Rates and Share of Demand Components in Real GDP Growth at Market Prices Growth Rates + (-) Q1 (July/Sept.) Share in Growth Rate Q1 (July/Sept.) 2015/ / / /17 (%) (Percentage Point) * Real GDP Growth Domestic Demand A- Final Consumption Private Public B- Capital Formation (Including Change in Stock) Net External Demand A- Exports of Goods and Services (25.0) B- Imports of Goods and Services (6.8) Contributions of individual sectors may not sum to total growth due to rounding. Source: Growth rates are illustrated in Table (1/2) of the Statistical Annex. Contributions of demand components are calculated by researchers.

13 -5-1/2- Labor Force, Employment and Unemployment According to CAPMAS quarterly Labor Force Sample Survey (LFS) for Q1(July/Sept. 2016/2017), the size of the labor force increased by thousand persons or 2.9 percent (compared with Q1 of 2015/2016), to reach 28.8 million persons. Similarly, the number of employed persons mounted by thousand or 3.2 percent, to stand at 25.2 million. The sector of agriculture and fishing continued to acquire the majority of the total number of employed persons (20.5 percent), followed by wholesale and retail trade (13.3 percent), construction and building (13.1 percent), manufacturing (12.6 percent), and education (8.1 percent). Against this background, the number of unemployed persons remained unchanged at 3.6 million persons (the same figure of the period of comparison). As a result, the unemployment rate dropped to 12.6 percent of the total labor force (from 12.8 percent). Developments of Labor Market Indicators Unemployment Rate (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016/2017 Q Employment and Labor Force (%) 2011/ / / / /2016 Unemployment Labor Force Employment It is worthy to note that jobless males decreased from 9.3 percent to 8.7 percent, while jobless females rose from 24.9 percent to 25.9 percent. Data showed also that 88.4 percent of total jobless persons are holders of intermediate, above intermediate, university and post graduate degrees.

14 -6-1/3 Inflation A- Consumer Price Index (Urban) According to the CAPMAS statistics, headline CPI inflation (urban) picked up by 3.9 percent in Q1 (July/Sept.) of FY 2016/2017 (against 3.8 percent in the same quarter a year earlier). This slight increase in headline inflation was mainly due to the higher contributions of some groups, namely; clothing and footwear; restaurants and hotels; miscellaneous goods and services; housing, water, electricity, gas and fuel; transportation; and culture and recreation. These groups combined contributed a total of 1.6 percentage point (versus 0.7 point). Add to this the higher contribution of alcoholic beverages and tobacco (0.6 point against nil). However, the rise in inflation was held back by the decline in the contributions of food and beverages to 1.6 point (against 2.8 points) and healthcare (nil against 0.2 point), whereas the share of furnishings, household equipment and routine maintenance remained stable at 0.1 point. (%) Annual Rates of Change in Headline Consumer Price Index (CPI) & Food and Non-Alcoholic Beverages (Urban) (Jan 2010=100) July/Sept / / /2017 All Items Food and Non-Alcoholic Beverages The drop in the share of food and beverages from 2.8 points to 1.6 point came mainly on the back of the lower contributions of both vegetables (1.2 point against 2.8 points); and cereals and bread (negative 0.2 point against nil).

15 -7- Percentage Point Contributions of Main Food Items to Annual Headline Inflation During July/Sept Bread & Cereals Meat & Poultry Fish & Sea Food Milk, Cheese & Eggs Vegetables Non-Alcoholic Beverages 2015/ /2017 CPI Change Rates and Contributions of Main CPI Groups in Headline Inflation in the Periods of Review and Comparison Main CPI Groups Relative Weight Rates of Change (%) in July/Sept. (Jan = 100) Contributions in Headline Inflation (Percentage Point) in July/Sept. 2015/ / / /2017 General Index Food and non-alcoholic beverages Housing, water, electricity, gas, and fuel Healthcare Transportation Clothing and footwear Education Restaurants and hotels Furnishings, household equipment and routine maintenance Miscellaneous goods and services Telecommunications Culture and recreation Alcoholic beverages and Tobacco Source: For the rates of change in CPI groups: Table (1/3) in the Statistical Annex. For the Contributions of CPI groups: Economic Research Sector.

16 -8- Regarding headline CPI (m/m), it remained almost unchanged at 1.3 percent on average during the periods of review and comparison, and recorded its highest level (1.9 percent) in August (%) Monthly Rate of Change in CPI (Urban) Sept October November December January2015 February March April May June July August September October November December January2016 February March April May June July August Sept B- Producer Price Index (PPI) The headline PPI inflation rose by 4.4 percent in Q1 of 2016/2017 (against 1.0 percent in the same quarter a year earlier). That was traced to the higher contributions of manufacturing (2.0 points against 0.2 point); electricity, gas, steam, and air conditioning supplies (0.6 point against 0.2 point); and transportation and storage (0.2 point against nil). Moreover, the negative contribution of mining and quarrying improved (negative 0.1 point against negative 2.4 points). However, declines were observed in the contributions of agriculture and fishing (1.6 point against 2.7 points); and water supply, sanitation, and waste treatment and management (nil against 0.2 point). Meanwhile, the contribution of food services and accommodation remained stable at 0.1 point. Annual Rate of Change in PPI (2004/2005=100) During the period July/Sept. (%) / / /2017

17 -9- Rates of Change and Shares of PPI Groups in Headline Inflation during the Periods of Review and Comparison Main PPI Groups Relative Weight Change Rates +(-) in July/Sept. Share in Headline Inflation in July/Sept. 2015/ / / /2017 % (Percentage Point) General Index Manufacturing Agriculture and fishing Mining and quarrying 21.8 (17.7) (1.3) Food services and accommodation Transportation and storage Electricity, gas, steam, and air conditioning supplies IT and Communications Water supply, sanitation, and waste treatment and management

18 -10-1/4- Tourism The statistics issued by the Central Agency for Public Mobilization and Statistics (CAPMAS) showed a decline in both the number of arrivals and the number of tourist nights by departure. In detail, the number of arrivals decreased by 42.7 percent, to just 1.5 million in Q1 (July/Sept.) of FY 2016/2017, compared with 2.6 million in Q1 of the previous FY. The number of tourist nights by departure fell by 61.3 percent to 9.2 million (compared with 23.7 million). Accordingly, the average length of stay decreased to 6.0 nights from 9.0 nights. However, the average tourist spending per night rose from US$ 72.7 to US$ Numbers of Tourists and Tourist Nights in July/Sept M i l l i o n N ig h t s / / /2017 chart M i l l i o n T o u r i s t s Number of Tourists Number of Tourist Nights Against this background, tourism revenues remarkably decreased in Q1 2016/2017 by 56.1 percent, to just US$ 0.8 billion (representing 6.1 percent of total current receipts, including net private transfers), compared to US$ 1.7 billion (or 12.3 percent) in the same quarter a year earlier.

19 -11- Tourism Revenues in July/Sept. % Billion Dollar / / / Tourism Revenues (US$ bn) Tourism Revenues/Total Current Receipts including Net Private Transfers (%) Moreover, investments in tourism sector accounted for LE 1.4 billion or 1.5 percent of total investments in Q1 of 2016/2017 (compared to LE 1.3 billion). Tourism Indicators Q1 (July/Sept.) Growth 2015/ /2017 Rate (%) + (-) Number of arrivals (000s) (42.7) Number of tourist nights by departure (000s) (61.3) Tourism revenues (US$ mn) (56.1) Tourism revenues/ Total current receipts including net private transfers (%) Investments in tourism sector/ Total investments (%) Average spending per tourist a night (US$) Average length of stay (night) (32.7) Source: CAPMAS, the Ministry of Planning, Monitoring and Administrative Reform, and the Ministry of Tourism

20 -12- Geographical Distribution of Tourist Flows 1-Number of Arrivals: Total arrivals markedly declined by 42.7 percent or 1124 thousand tourists in Q1 (July/ Sept. 2016/2017), to only 1.5 million. Such a drop was mainly ascribed to the decline in the number of arrivals from European countries by 66.7 percent to 0.6 million or 42.3 percent of total arrivals (against 1.9 million or 72.8 percent in the same quarter a year earlier). Likewise, the number of arrivals from the Americas and other countries fell by 12.9 percent, to 78 thousand tourists (or 5.2 percent of total tourists). Such a decline was held back by the rise of 26.4 percent or 165 thousand tourists in the number of arrivals from the Middle East, Africa, and Asia and the Pacific, to stand at 790 thousand tourists or 52.5 percent of total arrivals (against 625 thousand tourists). No. (000s) Number of Arrivals Q1 (July/Sept.) 2015/ /2017 Relative Weight No. (000s) Relative Weight No. (000s) Change +(-) Growth Rate (%) Total (1124) (42.7) Europe (1277) (66.7) Middle East Africa The Americas (10) (11.3) Asia and the Pacific Others (2) (34.0) 2- Tourist Nights by Departure: Along the same lines, the number of tourist nights by departure decreased by 14.5 million or 61.3 percent to reach 9.2 million. This noticeable decline was mainly attributed to the drop in the number of tourist nights by departure from the European countries by 13.8 million or 79.6 percent, to merely 3.5 million in the quarter under review (against 17.3 million). Similarly, the number of tourist nights for the remaining geographical groups declined by 0.8 million or 11.9 percent to 5.7 million (against 6.4 million).

21 -13- Number of Tourist Nights by Departure No. (000s) Q1(July/Sept.) 2015/ /2017 Relative Weight No. (000s) Relative Weight Change + (-) No. (000s) Growth Rate (%) Total (14545) (61.3) Europe (13777) (79.6) Middle East (283) (6.8) Africa (148) (14.7) The Americas (201) (26.8) Asia and the Pacific (128) (24.6) Others (8) (52.6)

22 Monetary and Banking Developments 2/1- Monetary and Banking Policy and Monetary Aggregates 2/1/1- Monetary Policy As the ultimate objective of the monetary policy is price stability, the CBE seeks to bring inflation to an appropriate and stable level conducive to building confidence, stimulating investment and achieving the targeted economic growth. The overnight interbank interest rate is considered the operational target of the monetary policy, whereby a framework based on the corridor system is applied, within which the ceiling is the overnight interest rate on lending from the Central Bank, and the floor is the overnight deposit interest rate at the Bank. Below are the monetary policy decisions taken in July/September 2016/2017: The MPC's decisions in its periodic meetings during Q1 of FY 2016/2017 were consistent with inflation developments and the MPC's inflationary pressure forecasts. The seasonal changes in prices were mainly associated with the Eid festivities and the higher prices of regulated items (goods and services), primarily electricity, under the measures taken to reform public finance. The pass-through from previous exchange rate movements to domestic prices as measured by the consumer price index remained limited. As a result, the Committee decided in its two meetings held on 28 July and 22 September 2016 to keep the overnight deposit and lending rates unchanged at percent and percent, respectively. Also the CBE's main operations (repos or deposit auctions, depending on market liquidity conditions) and the CBE's discount rate remained unchanged at percent, each. Out of its keenness to shore up confidence in the Egyptian economy and achieve monetary stability by targeting lower levels of inflation, the CBE decided on November 3, 2016 (at the time of preparing this Review) to embark on several measures to adjust the foreign currency trading policy through liberalizing the exchange rates. According to this decision, banks are at liberty to quote and trade at any exchange rate. The decision came in line with a broader package of reforms that will ensure macroeconomic stability through fiscal consolidation as announced by the government and is intended to restore FX trading to formal banking channels and eliminate the parallel market. This can

23 -15- be achieved by completing the subsidy reform program, rationalizing government spending, reducing imports especially random imports, increasing exports, and encouraging firmly implemented domestic investment. By doing so, the government aims - through the fiscal and monetary package of reforms- to enable the Egyptian economy to address the longstanding challenges, unleash its vast potentials, and achieve the aspired growth and employment rates according to Egypt's human, natural and physical resources. In this regard, the CBE has taken the following decisions: 1. Giving banks operating in Egypt the liberty to quote and trade at any exchange rate through reactivating the interbank mechanism. 2. Raising the overnight deposit and lending rates by 300 basis points to percent and percent, respectively. The rate of the CBE's main operations and the discount rate were also raised by 300 bps to percent and percent, in order. The MPC decided in its third and fourth meetings dated 17 November and 29 December 2016 (at the time of preparing this Review) to keep the main interest rates unchanged. The following are the key developments that took place during the period under review:- First: Interest Rates: 1- Overnight Interbank Interest Rates The MPC's decisions in the period in question affected the overnight interbank interest rates. Given the continuous increase in liquidity levels at the banking system, the weighted average of the overnight interbank interest rate moved close to the corridor floor rate, as illustrated in the following chart:

24 Interest Rates on LE Loans and Deposits The MPC's decisions also affected the interest rates in the money market that trended upwards as shown in the following table: Weighted Average Interest Rate Month June 2016 (%) September 2016 (%) Deposits More than one month and up to three months More than three months and up to six months More than six months and up to one year Loans* For one year or less * The interest rate on corporate loans after the application of Domestic Money Monitoring System (DMMS). Second: Open Market Operations In July/September 2016/2017, there was a noticeable rise in the average liquidity absorbed by the CBE via its monetary policy instruments (the overnight deposit operations and the 7- day deposit acceptance operations) thereby posting LE billion at the end of September 2016.

25 -17- The rise in liquidity; the short maturity of 7-day deposit acceptance operations; and the new procedures adopted as of 3 November 2016 highlighted the need for adopting a more tightening monetary policy for excess liquidity to increase the effectiveness of liquidity management and prevent FX speculations especially given the high volume of excess liquidity. In this context, some adjustments were made to the current operational structure of the monetary policy, to include longer-term deposit acceptance operations. Hence, an operational structure for operations with maturities ranging between 28, 56, 112, and 210 days was implemented to avoid any conflict with the maturities of issued treasury bonds and bills. 2/1/2- Reserve Money (M0) Reserve money is considered the base of money in its broader definition and is also known as the monetary base or high-powered money. It is composed of money in circulation outside the CBE and local currency deposits of banks therewith. The counterpart assets of reserve money are made up of the CBE's net foreign assets and net domestic assets. The latter includes net claims on both the government and banks, and net balancing items. At the end of Sept. 2016, reserve money reached LE billion, up by LE 30.1 billion or 6.3 percent during July/Sept. 2016/2017 (against a retreat of LE 61.4 billion or 12.6 percent in the previous corresponding period). The rise in reserve money was reflected in the pickup in both currency in circulation outside the CBE by LE 25.2 billion or 6.9 percent, to LE billion or 77.5 percent of reserve money; and banks' local currency deposits at the CBE by LE 4.9 billion or 4.4 percent, to LE billion at end of Sept % (5.0) (10.0) (15.0) (20.0) Contribution of the Components of Reserve Money to its Change During July/Sept (16.1) 2014/ / /2017 Bank's deposits in local currency Growth rate of resrve money Currency in circulation outside the CBE

26 -18- Reserve Money and Counterpart Assets* Balances at end of Sept (LE mn) Change during July/Sept. + (-) 2015/ /2017 Value % Value % A- Reserve Money (61445) (12.6) Currency in circulation outside the CBE Banks' local currency deposits (78284) (45.4) B- Counterpart Assets (61445) (12.6) Net Foreign Assets (29771) (117.8) (12323) 27.5 Foreign assets (25305) (17.1) Foreign liabilities Net Domestic Assets (31674) (6.9) Net claims on government Net claims on banks (113.4) Net balancing items (134401) (34307) 22.0 * Derived from the CBE's balance sheet. The breakdown of currency in circulation by denomination revealed a rise in the relative importance of the LE 200 note from 52.6 percent at end of June 2016 to 53.2 percent at end of Sept. and that of the LE 100 note from 35.9 percent to 36.0 percent. Conversely, the relative importance of the LE 50 note retreated to 7.4 percent (from 7.9 percent), and that of the medium denominations (LE 5, 10, and 20) to 2.9 percent (from 3.1 percent). As a result, average value of the note increased to LE at end of September 2016 (from LE at end of June). The pickup in currency in circulation outside the CBE was a reflection of the increase in banknote issue by LE 25.9 billion or 7.0 percent in July/September 2016/2017, to LE billion at end of September 2016 or percent of GDP for FY 2016/2017. Components of the note issue cover at end of September 2016 ran as follows: gold made up LE 24.0 billion worth or 6.1 percent, Egyptian government bonds LE billion or 57.5 percent, and foreign currencies and notes LE billion worth or 36.4 percent. It is worthy to note that the available issue cover in the CBE's financial statement recorded LE billion (1.41 times coverage rate) on 30 September 2016, against LE billion and 1.47 times at end of June.

27 -19- LE bn Net claims on government and its components June 2015 Sept June 2016 Sept Claims on government Deposits Net claims on government Regarding the counterpart assets of reserve money, net domestic assets increased by LE 42.4 billion, contributing 8.9 percentage points to the reserve money growth. Meanwhile, net foreign assets decreased by LE 12.3 billion worth, mitigating as such the growth in reserve money by 2.6 percentage points. The increase in net domestic assets at the CBE during the reporting period came on the back of the following developments:- The rise in the CBE's net claims on the government by LE 48.7 billion or 7.9 percent due to the increase in the CBE's claims on the government by LE 19.8 billion, and the retreat in the government's deposits at the CBE by LE 28.9 billion. The pickup in the CBE's net claims on banks by LE 28.0 billion as a result of the increase in the CBE's claims on banks by LE 26.3 billion, and the retreat in their foreign currency deposits at the CBE by LE 1.7 billion worth. The LE 34.3 billion surge in the negative balance of net balancing items causing as such a contractionary effect on reserve money. This was an outcome of the rise in deposits accepted by the CBE by LE 51.0 billion, on the one hand, and the growth in other assets and liabilities (net) by LE 16.7 billion, on the other.

28 -20- In the meantime, net foreign assets at the CBE rolled back by LE 12.3 billion worth during the period under review as a result of the rise in both foreign liabilities at the CBE by LE 30.2 billion worth or 15.5 percent, as well as foreign assets by LE 17.9 billion worth or 11.9 percent. 2/1/3 Domestic Liquidity (M2) and Counterpart Assets Domestic liquidity (M2) consists of currency in circulation outside the banking system and non-government deposits at banks (in both local and foreign currencies). In July/Sept. 2016/2017, domestic liquidity grew by LE 88.6 billion or 4.2 percent, against LE 84.8 billion or 4.8 percent in the same period a year earlier. This brought total domestic liquidity to LE billion at end of September 2016 or 67.3 percent of GDP in FY 2016/2017. The pickup in domestic liquidity during the reporting period reflected the growth in both money supply and quasi-money. Money supply rose by LE 34.2 billion or 6.0 percent (compared with LE 22.2 billion or 4.5 percent in the previous corresponding period), reaching LE billion at end of September The increase in money supply during July/Sept. 2016/2017 was attributable to the pickup in both currency in circulation outside the banking system by LE 23.3 billion or 6.7 percent to LE billion at end of Sept. 2016; and local currency demand deposits at banks by LE 10.9 billion or 4.8 percent. The latter was a result of the rise in the deposits of the private business sector by LE 8.4 billion (6.5 percent) to LE billion, and those of the household sector by LE 3.4 billion or 4.4 percent to LE 80.3 billion. Meanwhile, deposits of the public business sector retreated by LE 1.1 billion (5.4 percent) to LE 19.5 billion.

29 -21- Quasi-money augmented by LE 54.4 billion or 3.6 percent to LE billion at end of September 2016 (against LE 62.6 billion or 4.9 percent in the previous corresponding period). Such an increase comes on the back of the following developments:- The rise in LE time and saving deposits by LE 51.9 billion or 4.3 percent, to LE billion at end of September This was ascribed to the pickup in the deposits of the household sector by LE 36.0 billion or 3.5 percent, to LE billion; those of the private business sector by LE 15.8 billion or 11.7 percent, to LE billion; and those of the public business sector by LE 0.2 billion or 0.7 percent, to LE 23.2 billion. The pickup in foreign currency deposits by LE 2.5 billion worth or 0.8 percent (against a rise of LE 11.5 billion worth or 4.4 percent) to LE billion worth. This was a result of the increase in the deposits of the household sector by LE 5.5 billion worth; as well as the decline in the deposits of both the private business sector by LE 2.4 billion worth, and the public business sector by LE 0.6 billion worth. In the meantime, the ratio of foreign currency deposits to total deposits at banks (dollarization rate) reached 18.0 percent at the end of September 2016 (against 18.5 percent at the end of June 2016). Dollarization Rate (Deposits inus$/total Deposits) &Interest Rate on Deposits in LE & US$ (%) (%) Interest Rate on 3-month Deposits in LE(Left axe) Interest Rate on 3-month Deposits in US$ (Left axe) Dollarization Rate (right axe) Regarding the contribution of the counterpart assets of domestic liquidity to its growth, net domestic assets positively contributed 5.4 percentage points, while net foreign assets made a negative contribution of 1.2 percentage point.

30 -22- Domestic Liquidity Growth by Counterpart Assets During July/Sept. Percentage point (1) (0.1) (2) (0.6) (1.2) (3) (2.3) 2014/ / /2017 Net Foreign Assets Net Balancing items Domestic Credit Assets Domestic Liquidity Growth Rate The increase in net domestic assets during the period reached LE billion or 5.2 percent to LE billion at the end of September This was mainly attributed to the rise in banks' domestic credit by LE billion or 5.1 percent to LE billion at the end of September Add to this the pickup in the negative balance of net balancing items by LE 11.7 billion or 4.2 percent (as capital accounts augmented by LE 28.0 billion, and net unclassified assets and liabilities rose by LE 16.3 billion). The rise in domestic credit in the reporting period was attributed to the following developments:- Net credit to the government from the banking system surged by LE billion or 6.4 percent in July/September 2016/2017 (against a rise of LE 93.6 billion or 7.2 percent in the same period a year earlier), to LE billion, representing as such 68.1 percent of total credit at end of Sept The

31 -23- surge was a dual effect of the rise in both banks holdings of government securities and TBs by LE 57.7 billion and loans to the government by LE 32.4 billion; and of the decline in government deposits at the banking system by LE 15.8 billion. Credit to the private business sector grew during the period by LE 11.3 billion or 2.2 percent (against an increase of LE 0.5 billion or 0.1 percent to LE billion or 19.9 percent of total domestic credit at the end of September Credit to the household sector augmented by LE 5.5 billion or 2.6 percent (against LE 6.8 billion or 3.9 percent) to LE billion at end of September Credit to the public business sector rose by LE 2.0 billion or 2.2 percent (against LE 11.7 billion or 18.5 percent) to LE 95.0 billion at end of September Net foreign assets at the banking system (expressed in LE) reached a negative LE billion at end of September 2016, down by LE 24.4 billion in July/September 2016/2017 (against a retreat of LE 41.0 billion in the same period a year earlier). The decrease was brought about by the decline in net foreign assets at the CBE by LE 12.3 billion, and banks by LE 12.1 billion. Change in Foreign Assets & Liabilities at the Banking System (LE mn) Change during July/Sept. + (-) 2015/ /2017 Value Growth Rate (%) Value Growth Rate (%) Net Foreign Assets at the Banking System (40985) (79.6) (24442) 28.0 Net Foreign Assets at the CBE (29771) (117.8) (12323) Assets (25305) (17.1) Liabilities Net Foreign Assets at Banks (11214) (42.8) (12119) Assets (4450) (5.2) Liabilities

32 -24-2/1/4 - Payment Systems and Information Technology (IT) The payment systems and information technology sector witnessed a number of achievements in July/Sept. 2016/2017. The most important of which are the following: The CBE has decided on the company that will establish the permanent Disaster Recovery (DR) site for the CBE, to be functional in emergencies as a substitute for the main Information Center in El-Gomhoreya Building. This is intended to guarantee the continuity of the service. The company was selected via a limited bid. The plot of land has been already delivered to the company, and the project is currently under construction according to the set plan. Under the plan of developing and upgrading the payment systems and IT sector, the CBE's BoD agreed on Dec. 17, 2015 to entrust the National Defense Council with implementing the project of developing and upgrading the main Information Center in El-Gomhoreya Building and readjusting its infrastructure to meet the work requirements of the CBE and banking sector. Within this context, requirements have been thoroughly identified, technical and financial tenders presented by the Defense Council have been reviewed, and contracts have been concluded. Banks providing e-banking services have identified the gaps and submitted a corrective plan to adjust their conditions. The e-banking regulations of each bank have been already recorded and analyzed to enable the CBE to take the necessary measures against non-compliant banks or banks that request approval to add new services. Such measures guarantee the continuity, efficiency and safety of e-banking services provided to customers by the Egyptian banking sector. The automation of all operations was completed in the three branches of the Bank (Alexandria, Port Said and El- Mohandeseen). These branches have already been connected to the Head office and are being operated via the same electronic systems applied in Cairo branch and the Head office. A Human Resources Management System (HRMS) is currently applied in these branches.

33 -25- A gap analysis of the IT infrastructure of archives and microfilm was completed. Accordingly, the work methods were modernized and a new work-procedures manual was approved. Moreover, a scientific reference for archiving and microfilming (including reviewing quality requirements and retention periods for paper and microfilm documents) is under approval. The archive and microfilming system was developed through a digital to microfilm conversion project. A digital archive will be maintained for internal retrieval. In addition, the paper archive platforms will be developed, and an alternative microfilms library will be established at the archives of the Printing Press. As four major banks; namely the National Bank of Egypt, Banque Misr, Banque du Caire and Alex Bank, along with their branches in governorates, are entrusted, under an agreement with the CBE, with exercising government finance activities (e.g., payment of cheques drawn on the CBE - receipts on behalf of the CBE), signatures of governmental authorities' representatives, as well as any other authorized signatories, were uploaded on the electronic systems of these banks. Accordingly, government signature forms were copied and sent to the said financing banks via the Secure FTP Server. The server allows for the easy transfer of these signatures to banks' internal information systems for inquiry purpose. This project has been tested in the stage of parallel operation in preparation for the actual operation of the new system. The CBE is currently gearing to join the Regional Payment and Settlement System (REPSS) run by the COMESA Clearing House. This system aims at enhancing trade exchange with the COMESA countries, being crucial for the national security of Egypt. At present, the required technical systems are being prepared and the relevant CBE's internal rules and procedures are being examined. The CBE is working on fostering financial inclusion by enhancing access to simple banking services. An example of these services is the mobile wallet, whose users exceeded five and half million persons. The CBE aims at widening access to this service for all society segments, especially the underprivileged. At present, some final amendments to the rules regulating this service are being introduced.

34 -26- Establishing a system of central securities depository for government-issued securities (CSD), a collateral management system (CMS), an auction system, and an electronic trading platform for government securities, in cooperation with the European Bank for Reconstruction and Development and the African Development Bank. The project aims at establishing a clearing and central depository system to replace the current Book Entry System, and an auction system to replace the system currently in operation, in addition to an e-trading platform and a collateral management system. Contracts related to the grant were concluded with the two said banks. Also, a Prequalification Document for suppliers was issued and the committee in charge is in the final stage of selecting potential suppliers. The CBE is upgrading the current version of RTGS in Egyptian pound. Related software is being modified and upgraded, as a step towards the actual implementation of the project. The SWIFT software will be changed from Turbo to Alliance system. Proposals of specialized companies in this regard are currently examined. The CBE has tightened control over import operations through automating Form 4, for commodity imports, and linking it with both the Customs Authority and banks via an electronic system that is consistent with the CBE s information security standards. The electronic version of the Form shall be available at the Customs Authority. The said Authority will enter the actual assessment of any released consignment as well as the commodity classification of its items. The following steps have been implemented: The CBE assigned the Egyptian Banks Company, which manages the National Switch Network and connects all banks operating in Egypt, to create the required electronic system. The Company has already designed and tested the new system and all banks have completed the related training. The project parallel operation has started as of April 20 th, 2016 to date. A daily follow-up is conducted with banks, the Egyptian Banks Company and the Customs Authority to ensure the functioning of the system and to address any problems appropriately in due time.

35 -27- The CBE has completed the preparation of the system of the SMEs financing initiative, which aims at funding new machinery and equipment for industrial purposes. The system testing is being carried out before the actual operation. The CBE is revamping its branches in Alexandria and Port Said, in participation with all sectors of the CBE and the project consultant as well. All technical requirements have been specified and taken into account while preparing the engineering drawings. The CBE is upgrading its telephony communication network in the Head office and connecting it with some branches, to overcome the incompatible properties of the aging PBX phone system. 2/1/5- RTGS and SWIFT Local Services Local bank transfers in Egyptian pound under the RTGS showed an increase in the number and value of executed messages to thousand in July/September 2016/2017 (from thousand in the corresponding period a year earlier). Their value also increased to LE billion (from LE billion). Notably, such transactions included transfers of banks and clients and transactions of treasury bills, Misr for Central Clearing, Depository and Registry (MCDR), and the National Debit Switch, in addition to corridor operations and deposits for monetary policy purposes. RTGS and SWIFT Local Services (in Local Currency) Number of Value of Change during the During Messages Transfers Period + (-) July/Sept. (Unit) (LE bn) Number Value 2014/ (11455) / /

36 -28- According to the statistics of the CBE Automated Clearing House that applies the RTGS system, the number of exchanged papers reached 3.1 million at a value of LE billion (against 3.3 million at a value of LE billion). As a result, the average value per paper moved up to LE 86.9 thousand (from LE 80.5 thousand). During July/Sept. CBE Automated Clearing House Activity Number of Papers (Thousand) Value of Papers (LE bn) Change (%) Number Value 2014/ / / (4.8) 2.6 Transactions executed in foreign currencies under the Fin-Copy system, via SWIFT, revealed a sharp decline in their number and value during the period under review. Specifically, their number decreased to 319, at a value of US$ 341 million, against 1.1 thousand, at a value of US$ 1.3 billion in the corresponding period a year earlier. During July/Sept. Number of Messages (Unit) SWIFT Local Services (in US Dollar) Value of Transfers (US$ mn) Change during the Period + (-) Number Value 2014/ (97) (1050) 2015/ / (30) (797) (119) (911)

37 2/2/1- Supervision Sector -29-2/2- Banking and Credit Developments The CBE conducts supervision over banks operating in Egypt to ensure their sound financial positions and evaluate their performance from the perspective of risk based supervision. In addition, it ascertains banks compliance with the CBE established regulatory standards, including the minimum reserve requirement and liquidity ratios, the maximum limits of a bank s concentration of investments with a single customer, along with his related parties, and investments abroad, as well as the asset-liability matching in terms of maturity and currency. This is in addition to a number of qualitative standards that ensure alongside the above the soundness of banks performance and the safety of depositors funds. Among these standards are governance rules; information systems efficiency rules; and ''Fit and proper'' criteria for officials and managers of key sectors at banks. The CBE has prepared and implemented the Banking Sector Reform Program, through which banks have been restructured, their capital has been raised and their risk management has been strengthened. It is worth mentioning that one of the most fruitful results of the said Program was the applications of Basel II requirements as the CBE's BoD has approved in its session dated December 18, 2012 the regulations of the minimum capital adequacy requirement. In line with Basel Committee's proposal to introduce a ''leverage ratio'' to act as a supplementary measure to the risk-based capital adequacy requirements (in line with the timeline for applying Basel III accords), the CBE's BoD approved in its session held on 7 July 2015 the leverage ratio regulations. Under these regulations, banks are required to meet Basel III leverage ratio; first as an indicative ratio starting from the end of September 2015 till 2017, then as a mandatory ratio as of To enhance the link between a bank s risk profile and its internal risk management and capital adequacy assessment, the CBE started applying the second pillar of Basel II requirements based on two pivotal points, as follows:-

38 -30- a- In its meeting held on the 2 nd of March 2016, the CBE's BoD approved the regulations of the internal capital adequacy assessment process (ICAAP), required to be conducted by banks in accordance with each bank's risk profile, to address all types of risks (including the risks that were not tackled in the first pillar). b- The CBE has taken several measures to apply the Supervisory Review and Evaluation Process (SREP). The key purpose of SREP is to ensure that banks maintain adequate capital to ensure a sound coverage of their risks, as well as to encourage them to develop and use appropriate risk-management techniques to monitor, manage, measure and address all the risks they are vulnerable to. c- Out of its keenness to apply the best international practices, especially Basel III requirements, the CBE's BoD approved in its session on 7 April 2016 the implementation of the capital conservation buffer to ensure the coverage of losses that may arise during times of stress or financial crisis and to maintain the capital base of Egyptian banks. Banks operating in Egypt have to comply with these regulations as of the first of January 2016 for banks with fiscal year ending in December and as of the first of July 2016 for banks with fiscal year ending in June, in order to reach the required total ratio of 2.5 percent in January/July On the 13 th of July 2016, the CBE's BoD approved the regulations of liquidity risk management. Banks shall adhere to these regulations as of July 2016, as follows: First: Liquidity Coverage Ratio (LCR) Banks shall maintain a minimum ratio for each of local and foreign currencies, according to the following schedule: % 80% 90% 100% Second: Net Stable Funding Ratio (NSFR) Banks must comply with this ratio within a maximum period of three months starting from July 2016, as follows:

39 -31- Maintain a total minimum ratio of 100%. Maintain a minimum ratio of 100% for each of local and foreign currencies. Hereunder are the main instructions issued by the CBE to all banks during and after the period under review: Amending Articles No. 114 and 116 of Law No. 88 of the Year 2003 of the Central Bank, the Banking Sector and Money, regulating foreign exchange operations, and adding a new article No. 127 (bis) of penalties related to enhancing penalties for trading in foreign currencies outside the official channels. Banks issued 3-year and 18- month saving certificates with an annual return of 16 percent and 20 percent, in order, immediately after the CBE's decision of liberalizing the exchange rate on 3 rd November The CBE also emphasized the following points:- There are no restrictions imposed on deposit and withdrawal of foreign currencies for individuals and corporates. Importers of non-essential goods and services are still bound by the US$ 50,000 monthly limit for deposits and the US$ 30,000 daily limit for withdrawal. Ensuring the Mobile ATMs' Operating Rules and Regulations are complied with. Issuing "Unified Conditions" that banks shall abide by, including the provision of mortgage finance for low-income brackets, the pension policy for pensioners & pension beneficiaries, and people with freelance professions to help them have better access to finance under the Mortgage Finance Initiative. Extending the "Tourism Support Initiative" for a further year until the end of February 2018, and the "Retail Loan Initiative" for tourism sector's employees for six months until the end of June 2017.

40 -32- Amending the conditions of listing loans (subordinate deposits) according to capital adequacy standards in a way that allows international institutions or multilateral development banks to enter the Egyptian market, and pump foreign currency resources as some of them expressed their willingness to grant subordinate loans to Egyptian banks. Amending one of the determinants of customer's claims on small enterprises in accordance with the regulations that determined a risk weight of 75 percent to be applied only to micro, very small and small enterprises (excluding medium enterprises) with maximum annual sales less than LE 20 million instead of LE 10 million in response to the changes in exchange rates. In the period under review, 25 BoD members and 9 executive managers were added to the register of banks, pursuant to Article 43 of Law No. 88 of 2003 of the Central Bank, the Banking Sector and Money, and in compliance with the applicable Fit and Proper criteria. In light of Article 32/3 of the aforesaid Law which states that the Governor of the CBE, following the consent of the Board of Directors, shall approve the statute of the bank, and any modification thereto, certain articles of the statute of two banks were modified during the period in question. Furthermore, 38 new branches (including 21 ordinary branches, 14 minibranches, 2 Islamic mini-branches, and 1 seasonal branch) of 17 banks were added to the register of banks, whereas one Islamic branch and two agencies were delisted. This came in accordance with the regulations set by the CBE that give due regard to the soundness of financial positions, internal controls, and the efficiency of information systems of applicant banks to open new branches, together with their capital adequacy to ensure that they can better face the risks arising from the expansion in their activities. In light of the rules regulating the electronic payment services, 6 banks were licensed to offer 10 e-banking services. Concerning on-site supervision, the Supervision Sector at the CBE conducts supervision over banks, guided by the set plan. It focussed on:

41 -33- Verifying banks' compliance with the instructions stated in the Banks Law and its Executive Regulations as well as the instructions issued by the CBE. Identifying the different kinds of risks to which the inspected bank is vulnerable and performing quantitative and qualitative risk analysis to assess the risk level, then take the appropriate measures to minimize them and set plans for their avoidance; and making sure that the inspected bank secures enough provisions against non-performing loans, in order to guarantee the safety of depositors' and shareholders' funds. Ensuring the soundness of banks' financial positions and verifying that the financial data therein are identical to those in banks' records. Ongoing follow-up with the economic, financial, and monetary developments in light of the forex trading decisions which have been taken to curb speculations that adversely affect the national economy. Verifying the soundness of internal control at banks and compliance with the principles of good governance. Ensuring banks' compliance with the rules regulating E-banking services and that technology systems used at banks (including system upgrades), are adequately secured. 2/2/2 - Overview of the Aggregate Financial Position of Banks The aggregate financial position of banks (excluding the CBE) rose by LE billion or 7.8 percent in July/September 2016/2017, compared with LE billion or 9.4 percent in the same period of the previous FY, to reach LE billion at end of September The increase on the liabilities side stemmed from the growth of LE 79.5 billion or 3.8 percent in deposits at banks (against LE billion or 6.0 percent) to LE billion at end of September Moreover, equities at banks rose by LE 25.8 billion or 15.7 percent, to LE billion, obligations to banks abroad by LE 15.2 billion worth or 17.7 percent, bonds & long-term loans by LE 7.3 billion or 15.1 percent, obligations to banks in Egypt by LE 6.2 billion or 10.3 percent, provisions by LE 3.7 billion or 5.5 percent, and other liabilities by LE 83.7 billion or 27.5 percent.

42 -34- Relative Structure of Liabilities (End of September 2016) Other Liabilities 12.6% Equities 6.2% Provisions 2.3% Bonds & Longterm Loans 1.8% Obligations to Banks Abroad 3.3% Obligations to Banks in Egypt 2.2% Total Deposits 71.6% On the assets side, the increase reflected the growth in balances with banks in Egypt by LE 63.9 billion or 17.0 percent (primarily as a result of the increase in banks' balances at the CBE by LE 55.7 billion), to stand at LE billion at end of September Banks' investments in securities and bills also increased by LE 61.9 billion or 4.8 percent, to LE billion at end of September Likewise, lending and discount balances rose by LE 27.4 billion or 2.9 percent, to LE billion. This is besides the hikes in cash by LE 2.0 billion, balances with banks abroad by LE 1.7 billon worth, and other assets by LE 64.5 billion. Relative Importance of Assets (End of September 2016) Other Assets 7.4% Cash 1.1% Loan & Discount Balances 31.6% Securities & Investments 43.9% Balances with Banks Abroad 1.7% Balances with Banks in Egypt 14.3%

43 -35- Most of the increase in banks' investments in securities and bills reflects higher investments in government bonds by LE 31.4 billion, treasury bills by LE 26.3 billion, corporate equities by LE 3.6 billion, and banks' investments in foreign securities by LE 0.6 billion worth. Meanwhile, banks' investments in non-government bonds remained almost unchanged. (%) Relative Structure of Banks' Portfolio Investments (End of September 2016 ) Treasury Bills Gov. Bonds Corp. Equities Foreign Securities Non-gov. Bonds 2/2/3- Interbank Transactions 2/2/3/1- Transactions with Banks Abroad Transactions of local banks with correspondents abroad posted a net debit position of LE 48.5 billion worth at end of September 2016, up by LE 13.5 billion worth during July/September 2016/2017. This was a result of the pickup in their obligations to banks abroad by LE 15.2 billion worth and their balances therewith by only LE 1.7 billion worth. End of June 2015 Transactions with Banks Abroad Sept June 2016 Sept (LE mn) Change in July/Sept. 2015/ /2017 Value % Value % Net Position (9527) (38.6) (13473) 38.5 Balances with banks abroad (2061) (3.8) Obligations to banks abroad

44 -36-2/2/3/2- Interbank Transactions in Egypt The volume of transactions in the interbank money market in Egypt (in terms of deposits) surged by LE 8.1 billion or 14.2 percent in the period under review (against LE 8.4 billion or 42.6 percent in the same period of the previous FY), bringing total deposits to LE 65.2 billion at end of September The increase was an outcome of the pickup in foreign currency deposits by LE 12.4 billion worth. However, such a rise was mitigated by the decline in local currency deposits by LE 4.3 billion. LE bn 60 Deposits in the Interbank Money Market (End of) June 2016 Sept Local Currency Foreign Currencies 2/2/4 - Deposits Banks' deposits (including government deposits) grew, during the reporting period, by LE 79.5 billion or 3.8 percent (versus LE billion or 6.0 percent in the same period a year earlier), to LE billion or 71.6 percent of banks' aggregate financial position at end of September About 90.4 percent of the increase was concentrated in local currency deposits which rose by LE 71.9 billion or 4.2 percent, to LE billion (or 80.3 percent of total deposits at end of September 2016). Foreign currency deposits went up by only LE 7.6 billion worth or 1.8 percent, to post LE billion worth at end of September The household sector accounted for 56.4 percent of the total increase in banks' deposits in local and foreign currencies. The private business sector came next with 28.6 percent, followed by the government sector (16.3 percent), and the external sector (0.6 percent). However, such an increase was held back by the negative contribution of the public business sector (1.9 percent).

45 End of -37- Deposits at Banks by Sector June 2016 Local Currency Sept (LE mn) Foreign Currencies June Sept Total Government sector Public business sector Private business sector Household sector External sector The household sector accounted for more than half the increase in local currency deposits. Specifically, its deposits scaled up by LE 39.4 billion or 3.5 percent to LE billion (representing 65.5 percent of total deposits in local currency at end of September 2016). Deposits of the private business sector increased as well by LE 25.1 billion or 9.5 percent to LE billion, those of the government sector by LE 8.2 billion or 3.2 percent, and those of the external sector by LE 0.2 billion or 1.7 percent at end of September By contrast, deposits of the public business sector dropped by LE 1.0 billion or 2.2 percent. LE bn (2) Change in Sectors' Local Currency Deposits during July/Sept (0.1) (1.0) Government Sector Public Business Private Business Household Sector Sector Sector 2015/ / External Sector

46 -38- Foreign currency deposits (expressed in LE) increased by LE 7.6 billion percent of such a rise came from the household sector, whose deposits mounted by LE 5.5 billion or 2.6 percent to LE billion (or 49.0 percent of total deposits in foreign currencies at end of September 2016). The government sector's deposits (accounting for 62.9 percent of the increase in foreign currency deposits) grew by LE 4.8 billion or 5.0 percent. The external sector's deposits inched up by only LE 0.3 billion or 8.5 percent. Such increases were held back by the decrease in the deposits of both the private and public business sectors by LE 2.4 billion (or 2.4 percent) and LE 0.6 billion (or 3.2 percent), respectively. LE bn (2) (4) (6) (8) (10) (12) Change in Sectors' Foreign Currency Deposits during July/Sept (0.6) (2.4) (10.2) Government Sector Public Business Private Business Household Sector External Sector Sector Sector 2015/ /2017 2/2/5- Lending Activity Banks' lending and discount balances to customers reached LE billion (accounting for 31.6 percent of total assets and 44.2 percent of total deposits at end of September 2016), up by LE 27.4 billion or 2.9 percent in July/September 2016/2017 (against an increase of LE 53.6 billion or 7.5 percent during the same period a year earlier). Such an increase was ascribable to the rise in lending and discount balances in local currency by LE 12.9 billion or 1.9 percent to LE billion, and those in foreign currencies by LE 14.5 billion worth or 5.4 percent to LE billion worth at end of September 2016.

47 -39- Loans by Sector (LE mn) Local Currency Foreign Currencies End of June 2016 Sept June 2016 Sept Total Government sector Public business sector Private business sector Household sector External sector The pickup in lending and discount balances in local currency came on the back of the rise in loans extended to all sectors during the period under review. Loans to the household sector surged by LE 5.2 billion or 2.5 percent, to LE billion at end of September Likewise, loans to the private business sector rose by LE 3.6 billion or 1.2 percent to LE billion; those to the government sector by LE 2.2 billion or 2.2 percent; those to the public business sector by LE 1.8 billion (or 2.7 percent); and those to the external sector by LE 0.1 billion. The government sector accounted for 71.1 percent of the increase in lending and discount balances in foreign currencies (expressed in LE), up by LE 10.3 billion or 14.1 percent, to LE 83.8 billion or 29.5 percent of total foreign currency loans at end of September Likewise, loans extended to the private business sector scaled up by LE 4.3 billion or 2.7 percent, to LE billion (representing 56.7 percent of the total foreign currency loans at end of September 2016). Loans to the household sector picked up by only LE 0.3 billion or 9.4 percent, and to the public business sector by LE 0.2 billion or 0.8 percent. Conversely, loans to the external sector fell by LE 0.6 billion. LE bn (5) (10) (15) 30.0 Government sector Public business sector Change in Lending and Discount Balances by Sector during July/Sept. Local Currency (4.6) 3.6 Private business sector Household sector External sector Government sector Foreign Currencies 0.2 Public business sector Private business sector 0.3 (0.2) (0.2) Household sector (0.6) External sector 2015/ /2017

48 -40- The relative distribution of loans by economic activity indicates that the manufacturing sector was the major recipient with a share of 34.0 percent of loans extended by banks in both local and foreign currencies at end of September The unclassified sectors, including the household sector, came next with a share of 32.3 percent, followed by the services sector (23.6 percent), then trade (9.0 percent) and agriculture (only 1.1 percent). LE bn Credit Facilities by Economic Activity End of Sept Agriculture Manufacturing Trade Services Unclassified sectors Foreign Currencies Local Currency At end of September 2016, banks' loans and advances (excluding discounts) by maturity registered LE billion, up by LE 27.7 billion or 3.0 percent during the reporting period. The increase was ascribable to the growth in longterm loans (more than one year) by LE 14.7 billion or 2.7 percent (owing to the rise in both local and foreign currency loans by LE 12.3 billion (or 3.0 percent) and LE 2.4 billion worth (or 1.9 percent), in order. Furthermore, short-term loans (one year or less) increased by LE 13.0 billion or 3.3 percent, due to the growth in local and foreign currency loans by LE 0.8 billion (or 0.3 percent) and LE 12.2 billion worth (or 8.8 percent), respectively. LE bn Loans & Advances by Banks Excluding Discounts (End of) Over One Year One Year or Less June 2016 Sept June 2016 Sept Local Currency Foreign Currencies

49 Non-Banking Financial Sector * 3/1- Stock Market The performance of the Egyptian Exchange (EGX) in July/Sept. 2016/2017 showed an increase in all price indices. Its benchmark index (EGX 30) increased by 13.5 percent to points at end of September 2016 (from points at end of June 2016). Also, EGX 20 Capped rose by 13.4 percent to points from points; EGX 70 by 0.2 percent to points from points; EGX 100 by 6.3 percent to points from points ; and EGX 50 EWI by 4.1 percent to points. In addition, NILEX index which reflects the performance of small and medium enterprises listed on the Nile Stock Exchange increased by 2.5 percent to points from points. Point The Benchmark EGX 30 Index Sectoral Indices Most of the sectoral indices witnessed increases during July/Sept. 2016/2017. The sector of personal and household products topped the list, up by 22.5 percent, followed by communications sector (18.9 percent), and banks (17.3 percent). Conversely, food and beverages registered the highest decline, down by 31.0 percent, followed by construction and building materials (12.4 percent). * Source: EFSA and EGX's monthly reports.

50 -42- Sectoral Indices At end of Change in Sector July/Sept. June 2016 Sept /2017 (%) Personal and household products Communications Banks Financial services (exc. banks) Real estate Industrial goods and services & cars Chemicals Tourism and leisure Basic resources Healthcare and pharmaceuticals Construction and building materials Food and beverages Concerning the primary market, the number of new issues approved by EFSA in the period under review reached 928, with a total value of LE 16.0 billion (against 891 issues, totaling LE 20.4 billion in the previous FY). Of this figure, issues for new businesses reached 685 in number (73.8 percent of total issues), at a value of LE 3.8 billion. Meanwhile, the number of issues for capital increases of existing companies stood at 243, totaling LE 12.2 billion (76.1 percent of the total value of issues). The listing activity on the EGX showed that the number of listed companies rose to 223 at end of September 2016 (from 222 at end of June 2016). In the meantime, the nominal capital of these companies decreased by 1.1 percent to LE billion (from LE billion). Meanwhile, their market capitalization grew by 5.8 percent to LE billion at end of September 2016 (from LE billion at end of June 2016). The value of issued and listed bonds went up by LE 33.0 billion or 4.4 percent in the quarter in question, to LE billion at end of Sept (against LE billion at end of June 2016). This was attributed to the rise of LE 38.7 billion in the value of Egyptian treasury bonds (primary dealers) to record LE billion or 99.2 percent of the total value of listed bonds at end of September Add to this the redemption of legal entities' bonds - that were listed on the EGX in December in an amount of LE 5.0 billion. Meanwhile, corporate and securitization bonds went down by LE 0.3 billion and LE 0.4 billion, respectively.

51 -43- Trading in the secondary market (including NILEX) showed that the number of traded securities (shares and bonds) rose during the period under review by 0.7 billion papers or 6.1 percent, to 11.5 billion. By contrast, their value stepped down by LE 20.3 billion or 31.6 percent to LE 43.9 billion and the number of transactions fell by 25.0 thousand or 2.2 percent to 1.1 million. Trading in shares on the EGX surged to 77.2 percent of the total value of transactions (against 47.6 percent in the same period a year earlier). However, trading in bonds decreased to 21.2 percent of the total (against 51.9 percent). Also, trading in mutual funds' certificates increased to 1.6 percent of the total (against 0.5 percent). Trading in Securities July/Sept. 2015/ /2017 No. of Transactions (000s) A- Shares, bonds and mutual funds' certificates (listed) B- Shares, bonds and mutual funds' certificates (unlisted) 6 6 C- Small and medium enterprises market (NILEX) No. of Traded Securities (mn) A- Shares, bonds and mutual funds' certificates (listed) B- Shares, bonds and mutual funds' certificates (unlisted) C- Small and medium enterprises market (NILEX) Value of Transactions (LE mn) A- Shares, bonds and mutual funds' certificates (listed) B- Shares, bonds and mutual funds' certificates (unlisted) C- Small and medium enterprises market (NILEX) Source: EFSA and EGX's monthly reports Turning to the market of small and medium enterprises (NILEX), the number of listed companies reached 31 and the market capitalization of their listed shares stood at LE 1.2 billion at end of September Also, the number of traded securities reached million papers during the period in question, executed through 33.0 thousand transactions, with a value of LE 0.2 billion. As for trading in the Exchange Traded Funds (ETFs) which track EGX 30 index, the number of their traded securities reached 2.0 million papers, with a total value of LE 21.0 million during the reporting period.

52 -44- Investors' Transactions * Foreigners' transactions on the EGX (purchases and sales) noticeably rose by 40.5 percent during July/Sept. 2016/2017 to LE 20.3 billion (against LE 14.5 billion in the same period last year). Their dealings resulted in net sales of LE million (against net purchases of LE million in the corresponding period). LE bn (1) (3) Foreign Investors' Transactions during July/Sept. 2015/ /2017 Purchases Sales Net Egyptians' trading on the EGX accounted for 69.8 percent of total transactions in July/Sept. 2016/2017. On the other hand, dealings of foreign investors represented 30.2 percent of the total. Ratios of Egyptian and Foreign Inv estors Transactions on the EGX during July/Sept. 2016/2017 Foreigners 30.2% Egyptians 69.8% 3/2- Mutual Funds Compared with September 2015, the number of mutual funds remained unchanged at 94 at end of September 2016 (93 open-end and 1 close-end). * This statement does not include primary dealers' transactions.

53 Public Finance and Domestic Public Debt 4/1- Fiscal Operations of the State Budget According to the preliminary data on actual execution of the state budget (administrative system, local administration and service authorities), total revenues decreased by LE 3.3 billion or 3.3 percent to LE 96.8 billion or 3.0 percent of GDP in July/Sept. 2016/2017; whereas total expenditures rose by LE 2.3 billion or 1.3 percent to LE billion or 5.3 percent of GDP. This resulted in a cash deficit of LE 75.4 billion. After adding the LE 1.4 billion net acquisition of financial assets to the cash deficit, the overall deficit decreased by LE 1.5 billion to LE 76.8 billion, representing 2.4 percent of GDP (compared to LE 78.3 billion or 2.8 percent of GDP in the previous FY). It is worth noting that the primary deficit in the state budget as a percentage of GDP fell to 0.6 percent in July/September 2016/2017 (from 1.0 percent in the same period a year earlier) This mirrored the impact of the corrective measures taken in public finance to achieve fiscal sustainability, while observing the social dimension of all society brackets, especially the low-income brackets under the comprehensive economic reform program recently adopted by the authorities. Ratios of Revenues, Expenditures & Overall Budget Deficit /GDP during July/Sept. Expenditures & Revenues (%) , , , Overall Budget Deficit (%) / / / / / Revenues Expenditures Overall Budget Deficit Hereunder is an analysis of the actual data released by the Ministry of Finance on the fiscal operations of the State budget during July/September 2016/2017, as compared to their actual figures in the same period a year earlier.

54 -46- Total revenues declined by LE 3.3 billion or 3.3 percent, to LE 96.8 billion or 3.0 percent of GDP during the period under review (against LE billion or 3.6 percent of GDP). Such a decrease was a combined result of the retreat in tax revenues by LE 0.4 billion or 0.6 percent, to LE 64.1 billion (or 66.2 percent of total revenues) and non-tax revenues by LE 2.9 billion or 8.1 percent, to LE 32.7 billion (or 33.8 percent of total revenues). This can be seen in the following chart: (%) Ratios of Tax Revenues, Property Income & Grants/Total Revenues during July/Sept / / / / / Tax Revenues Property Income Grants Tax revenues decreased by LE 0.4 billion as a confluence of the following developments: Taxes on income and capital gains decreased by LE 3.6 billion, due to lower proceeds from taxes on both the CBE by LE 3.4 billion (as the CBE made, in the previous corresponding period, partial repayments of the taxes for FY 2015/2016 in the amount of LE 6.0 billion under the income tax account), and Suez Canal Authority by LE 1.7 billion. Add to this the higher proceeds from taxes on salaries by LE 1.0 billion (reflecting the rise in total wages of state employees as of the beginning of the fiscal year), and from the rest of companies by LE 0.5 billion. Taxes on international trade (customs) decreased by LE 0.8 billion, due to the retreat in merchandise imports by LE 0.8 billion.

55 -47- Taxes on goods and services rose by LE 2.0 billion (or 7.0 percent), owing to the increase in sales taxes on both local and imported goods; and on international and local communications services. Add to this the rise in stamp duties on contracts of water, electricity, gas and telephone companies, as well as advertisements and transportation services and insurance. Property taxes moved up by LE 2.0 billion (or 35.1 percent), reflecting the rise in revenues from taxes on T-bills and bonds' payable interest. - The drop in non-tax revenues (LE 2.9 billion) was mainly explained by: The drop in external grants by LE 2.4 billion during the period under review to LE 0.1 billion (or 0.1 percent of total revenues). The decrease in property income by LE 0.5 billion to LE 25.3 billion (or 26.1 percent).

56 -48- Fiscal Operations of the Budget Sector (Public Revenues) Actual (LE bn) July/Sept. 2015/ /2017 Actual Change + (-) Value Relative Structure (%) Relative Structure (%) Total Revenues (3.3) Tax Revenues (0.4) Taxes on Income and Profits (3.6) From EGPC From SCA (1.7) From CBE (3.4) Other entities Payable by individuals Taxes on Property Taxes on Goods & Services Taxes on International Trade (customs) (0.8) Other Taxes Grants (2.4) Current Capital Other Revenues (0.5) Property Income (0.5) From EGPC From SCA From CBE (4.6) Economic authorities Companies (0.1) Other (EGPC & TML) Other Selling Proceeds of Goods and Services Financing Investments Others Source: Table (4/1) in the Statistical Annex. Percentages are calculated in terms of LE million... Unavailable..

57 -49- On the expenditures side, total expenditures accelerated by LE 2.3 billion or 1.3 percent, to LE billion or 5.3 percent of GDP (compared with LE billion or 6.1 percent of GDP). The following chart illustrates the developments in the main items of expenditures as a percentage of total expenditures. (%) Ratios of Wages & Compensations of Employees, Paid Interest and Subsidies / Total Expenditures during July/Sept / / / / / Wages & Compensations of Employees Paid Interest Subsidies The increase in total expenditures was an outcome of the following developments: - The increase in interest payments on domestic and external debts by LE 6.5 billion to LE 57.2 billion (or 33.2 percent of total expenditures). - The pickup in investments of budget sector related entities by LE 1.2 billion, as the government continued to increase public investments to develop the infrastructure and housing projects, and to expand investments in health and education sectors. - The rise in purchases of goods and services by LE 0.5 billion. - The decrease in subsidies, grants, and social benefits by LE 5.8 billion; including mainly:

58 -50- The decline in subsidy costs by LE 5.9 billion to LE 15.1 billion (or 8.8 percent of total expenditures), mainly because there were no settlements made with the EGPC. Add to this the decline in subsidies for supply commodities due to the different timing of purchasing domestic and imported wheat and not cutting the subsidy incurred by the State. In the meantime, the number of subsidy beneficiaries increased. Also, the demand for subsidized products rose due to its diversity and the government's enhancement of its quality. The decrease in grants extended by the government to some international entities and foreign governments by LE 1.3 billion. - The fall in other expenditures by LE 0.1 billion. Workers' wages and compensations remained unchanged at LE 55.3 billion. Accordingly, its ratio to total expenditures declined to 32.2 percent from 32.5 percent.

59 -51- Fiscal Operations of the Budget Sector (Public Expenditures) (LE bn) July/Sept. 2015/ /2017 Change + (-) Actual Relative Structure Actual Relative Structure Value (%) (%) Total Expenditures Workers' Wages & Compensations Salaries & Allowances (0.2) Insurance Benefits Other (0.2) Purchases of Goods & Services Goods Services Other (0.3) Interest Domestic To NIB & SIFs To others Foreign Subsidies, Grants & Social Benefits (5.8) Subsidies (5.9) To EGPC To GASC (4.9) Others (1.0) Grants (1.3) Social Benefits To SIFs Other Other Other Expenditures (0.1) Defense Other Purchases of Non- Financial Assets (Investments) Fixed assets Other Source: Table (4/2) in the Statistical Annex Percentages are calculated in terms of LE million... Unavailable.

60 -52- Against this background, the cash deficit of the budget sector amounted to LE 75.4 billion or 2.3 percent of GDP in the period under review. By adding the net acquisition of financial assets (LE 1.4 billion) to the cash deficit, the overall deficit would retreat by LE 1.5 billion to LE 76.8 billion or 2.4 percent of GDP, against LE 78.3 billion or 2.8 percent of GDP in the same period a year earlier.

61 -53-4/2- Domestic Public Debt At end of Sept. 2016, domestic public debt amounted to LE billion or 85.0 percent of GDP (against LE billion or 96.8 percent at end of June 2016), up by LE billion or 5.2 percent in July/Sept. 2016/2017. Gross Domestic Debt at End of Sept (LE bn) Gross Domestic Debt Intra-Debt NIB Debt (Net) Chart Net debt of Economic Authorities Net Domestic Debt of Government /2/1- Net Debt of the Government Government domestic debt (net) expanded by LE billion or 5.2 percent in the period under review, to register LE billion or 74.1 percent of GDP at end of September The surge was due to the rise of LE 84.3 billion in the balances of treasury bonds and bills, and of LE 33.9 billion in net government balances at the banking system (because of the rise in government loans by LE 29.4 billion and the retreat in its deposits by LE 4.5 billion). Meanwhile, the value of the issued Masri Dollar Certificates fell by LE 0.2 billion. Domestic public debt includes net debt of the government, public economic authorities, and the NIB, minus the intra-debt of both the government and public economic authorities to the NIB.

62 -54- Domestic Debt of the Government (LE bn) Change + (-) Balances at end of June 2016 Sept in July/Sept. 2016/2017 Value % Value % Domestic Government Debt (Net) Balances of Bonds and Bills Bonds of which; Tradable on exchanges Treasury bills Facilities from SIFs Borrowing from Other Entities Masri Dollar Certificates (0.2) - Net Balances at the Banking System Credit facilities Deposits (-) (4.5) Net Domestic Government Debt/GDP (%) Source :Table (4/4) in the Statistical Annex. Ratios are calculated in terms of LE million. The increase of LE 84.3 billion in the balance of bonds and bills was distributed as follows: 64.0 percent (or LE 54.0 billion worth) was in government bonds (of which LE 38.7 billion were in Egyptian treasury bonds listed on the EGX and LE 1.5 billion were in treasury bonds at the CBE mostly to cover the cash deficit in government balances) percent (or LE 30.3 billion worth) was in treasury bills (mostly in those issued in Egyptian pound). Net Domestic Debt of Government LE bn Net Domestic Debt of the Government /GDP Sept June 2016 Sept Net Government Balances with the Banking System Bonds & other Credit Facilities % Net Domestic Debt of Government /GDP Treasury Bills Ratio of Government Debt /GDP

63 -55-4/2/2- Net Debt of Public Economic Authorities In July/Sept. 2016/2017, net debt of public economic authorities surged by LE 15.2 billion, to LE billion at end of September This rise was traceable to the increase in their borrowing from both the banking system by LE 13.5 billion (due to the rise in their claims on the banking system by LE 2.9 billion and the decrease in their deposits therewith by LE 10.6 billion) and NIB by LE 1.7 billion. 4/2/3- Net Debt of the NIB Net debt of the NIB (including intra-debt) reached LE billion at end of September 2016, up by LE 7.8 billion during the period in question. The rise was an outcome of the surge in total resources invested at the NIB by LE 7.1 billion to LE billion, on the one hand, and the decline in its deposits at the banking system by LE 0.7 billion, on the other. Resources of the NIB at End of Sept Uses of the NIB at End of Sept Post Office Saving Account 35.2% Dollar Development Bonds &Others 0.6% Social Insurance Funds 17.6% Investment in Treasury Bills & Bonds 8.9% Deposits with the Banking System 1.5% Proceeds of Investment Certificates & Accumulated Interest 46.6% Loans to Public Economic Authorities 16.5% Loans to Holding Companies & Affiliate Units, Concessional Lending & Others 73.1% 4/2/4- Intra-Debt The intra-debt of public economic authorities and the government to NIB reached LE 82.0 billion at end of September 2016 (against LE 78.3 billion at the end of June 2016) up by LE 3.7 billion. Loans extended by the NIB to these authorities registered LE 53.2 billion, with a rise of LE 1.7 billion in July/ September 2016/2017. NIB's investments in government securities (bills and bonds) reached LE 28.8 billion, up by LE 2.0 billion.

64 External Transactions 5/1 Foreign Exchange Market and NIRs Out of its keenness to shore up confidence in the Egyptian economy and achieve monetary stability by targeting lower levels of inflation, the CBE decided on November 3, 2016 (at the time of preparing this Review) to embark on several measures to adjust the foreign currency trading policy through liberalizing the exchange rates. According to this decision, banks are at liberty to quote and trade at any exchange rate. The decision which came in line with a broader package of reforms that will ensure macroeconomic stability through fiscal consolidation, is intended to restore FX trading to formal banking channels and eliminate the parallel market. The volume of trade through periodic FX auctions reached US$ 0.3 billion in July/Sept. 2016/2017, bringing as such the volume of trade since the inception of this mechanism in Dec till the end of September 2016 to US$ 21.6 billion, with a monthly average of US$ million. Apart from these periodic auctions, the CBE holds exceptional auctions as dictated by market needs. Since the inception of this mechanism till the end of the period of review, the CBE held nine exceptional FX auctions, with a total value of US$ 7.7 billion. It is worthy to mention that the CBE sold more than US$ million in Q1 of FY 2016/2017 in the local market, so as to cover the staple commodities at banks. Furthermore, the CBE sold more than US$ 92 million during this period to clear pending backlogs of all aviation companies at Egyptian banks, and more than US$ 652 million to meet the oil sector's needs. Compared with the end of June 2016, the weighted average of the US dollar interbank rate remained unchanged at LE at the end of September At the end of May 2017 (during the preparation of this Review), the weighted average of the US dollar reached LE , with a decrease of 51.5 percent in the value of the Egyptian pound, relative to the end of June 2016.

65 -57- Net international reserves (NIR) at the CBE increased by US$ 2.0 billion or 11.7 percent in July/Sept. 2016/2017, to US$ 19.6 billion at end of September 2016 (covering 4.1 months of merchandise imports). Moreover, at the time of preparing this Review, NIRs increased to US$ 31.1 billion at end of May 2017 (covering 6.5 months of merchandise imports). (US$ bn) Net International Reserves & Months of Merchandise Imports Jun-14 Sep-14 Jun-15 Sep-15 Jun-16 Sep-16 Months NIR NIR/Months of Merchandise Imports

66 -58-5/2- Balance of Payments During the first quarter of FY 2016/2017, Egypt's transactions with the external world unfolded an overall BOP surplus of US$ 1.9 billion (against an overall deficit of US$ 3.7 billion in the same period a year earlier). This was due to the fact that the capital and financial account achieved a net inflow of US$ 7.1 billion (against US$ 1.6 billion). Meanwhile, the current account deficit mounted to US$ 5.0 billion (against US$ 4.0 billion). US $bn Main Items of BOP Q1 Q2 Q3 Q4 Q1 2015/ /2017 Capital & financial Account Current Account Overall Balance Below are the main factors that affected the BOP performance during the period under review and the period of comparison: The trade deficit retreated by 13.4 percent to US$ 8.7 billion (against US$ 10.0 billion). This was due to the increase in export proceeds by 11.2 percent to US$ 5.3 billion (against US$ 4.7 billion); and the decline in import payments by 5.5 percent to US$ 13.9 billion (against US$ 14.7 billion). The services surplus narrowed by 50.2 percent, owing to the drop in tourism revenues by 56.1 percent to only US$ million (against US$ 1.7 billion). Conversely, travel payments abroad scaled up to US$ 1.1 billion (against US$ million). Moreover, Suez Canal transit receipts fell by 4.8 percent to US$ 1.3 billion (against US$ 1.4 billion). Investment income balance registered a net outflow of US$ 1.1 billion, primarily due to the fact that investment income payments registered US$ 1.2 billion during the period under review. Meanwhile, investment income receipts registered only US$ 81.6 million.

67 -59- Net unrequited current transfers declined by 21.3 percent to US$ 3.39 billion (against US$ 4.32 billion), driven by the decrease in net private transfers to as low as US$ 3.36 billion (against US$ 4.29 billion), mainly on the back of the retreat in remittances of Egyptians working abroad by 22.3 percent. By contrast, net official transfers rose to US$ 33.8 million (from US$ 21.9 million). The net inflow of FDI in Egypt scaled up to US$ 1.9 billion (against US$ 1.4 billion). Portfolio investment in Egypt achieved a net outflow of US$ million (against US$ 1.4 billion). This was primarily due to the Egyptian authorities' repayment of bonds that had fallen due in the reporting period in the amount of US$ 1.0 billion (outflow). This attests to the commitment and ability of the Egyptian economy to honor its obligations. Medium- and long-term loans and facilities unfolded net disbursements of US$ million (against net repayments of US$ million). The net change in the liabilities of the CBE to the external world increased, thereby registering a net inflow of US$ 3.4 billion in the reporting period (against US$ 1.2 million), primarily due to the rise in the deposits of some Arab countries at the CBE. The net change in banks' liabilities rose, recording as such a net inflow of US$ 1.6 billion (against US$ million). Hereunder is a detailed review of BOP components during July/Sept. 2016/2017 compared with the same period a year earlier:

68 -60-5/2/1- Current Account The current account deficit registered US$ 5.0 billion during the period under review (against US$ 4.0 billion). This was a result of the decline in both services surplus by 50.2 percent to only US$ 1.4 billion (against US$ 2.8 billion), and net unrequited current transfers by 21.3 percent to only US$ 3.4 billion (against US$ 4.3 billion). The widening of the current account deficit was curbed by the retreat in the trade deficit by 13.4 percent to US$ 8.7 billion (against US$ 10.0 billion), as thoroughly illustrated below: US $bn Main Items of Current Account Q1 Q2 Q3 Q4 Q1 2015/ /2017 Trade Balance Services Balance Income Balance Net Current Transfers Current Account 5/2/1/1 - Trade Balance The trade deficit retreated by 13.4 percent to only US$ 8.7 billion (from US$ 10.0 billion), on the back of the increase in export proceeds and the decline in import payments, as detailed below: Merchandise export proceeds increased by 11.2 percent to US$ 5.3 billion (from US$ 4.7 billion). Such an increase was traceable to the rise of US$ million in non-oil exports and the drop of US$ million in oil exports, in the wake of the fall in world prices of crude oil by 8.4 percent and in the quantities exported of crude oil by 10.5 percent in the reporting period compared with the previous corresponding period.

69 -61- Merchandise import payments declined by 5.5 percent, registering US$ 13.9 billion (against US$ 14.7 billion), owing to the drop in both nonoil imports by US$ million and oil imports by US$ million. US$ bn Trade Balance Q1 Q2 Q3 Q4 Q1 2015/ /2017 Exports Imports Trade Balance Against this background, the coverage ratio of merchandise exports to merchandise imports went up to 37.8 percent in the period under review (from 32.1 percent in the period of comparison). This will be thoroughly illustrated hereafter in the commodity structure of foreign trade. 5/2/1/2- Balance of Services The services surplus retreated by 50.2 percent to US$ 1.4 billion (against US$ 2.8 billion), as a consequence of the drop in services receipts and the rise in services payments, as shown below: US$ bn Services Balance Q1 Q2 Q3 Q4 Q1 2015/ /2017 Services Receipts Services Payments Services Balance

70 Services Receipts Services receipts declined by 25.3 percent to US$ 3.8 billion (against US$ 5.0 billion), on the back of the drop in most items, as follows: Tourism revenues by 56.1 percent to only US$ million (against US$ 1.7 billion), owing to the fall in the number of tourist nights by 61.3 percent to 9.2 million nights (against 23.7 million), notwithstanding the pickup in the average spending per tourist a night from US$ 72.7 to US$ US$ bn Travel Receipts as a percentage of GDP Q1 Q2 Q3 Q4 Q1 2015/ /2017 Travel Receipts Travel Receipts as a percentage of GDP % Transportation receipts by 11.4 percent to US$ 2.3 billion (against US$ 2.6 billion). This was ascribed to the retreat in the receipts of Egyptian aviation and navigation companies. Another factor that added to the drop in transportation receipts was the decrease in Suez Canal transit receipts by 4.8 percent to US$ 1.3 billion (against US$ 1.4 billion), reflecting the decline in net tonnage of transiting vessels by 2.7 percent and the depreciation of SDR versus the US dollar by 0.4 percent. US$ bn Suez Canal Receipts Q1 Q2 Q3 Q4 Q1 2015/ /2017

71 -63- Government receipts by 49.3 percent to only US$ 62.5 million (against US$ million), mirroring the fall in other government receipts, as well as the expenses of foreign embassies in Egypt. On the other hand, the other services receipts increased by 9.2 percent to US$ million (against US$ million), resulting from the pickup in services receipts of culture & recreation and renting of films; advertising services and marketing researches; and legal & consultation fees. 2- Services Payments Services payments moved up by 6.6 percent to US$ 2.4 billion (from US$ 2.2 billion), as a result of the following developments: The rise in travel payments by 39.6 percent to US$ 1.1 billion (from US$ million), driven by the surge in e-card payments abroad by 93.6 percent to US$ million (from US$ million). Add to this the rise in tourism and medical treatment costs; and payments of tourism companies and hotels abroad. The decline in transportation payments by 19.7 percent to US$ million (from US$ million), due to the drop in the amounts transferred for repairing airplanes at foreign airports; those transferred by foreign navigation companies; and those transferred for renting ships. The decrease in other services payments by 7.7 percent to register US$ million (from US$ million), due to the fall in the amounts transferred abroad for construction and contracting services; insurance services; communications services; and royalties & license fees. The retreat in government expenditures by 14.4 percent to US$ million (from US$ million), owing to the decline in salaries & expenses of government employees seconded abroad and expenses of Egyptian embassies abroad.

72 -64- US$ bn 2.5 Services Balances (Surplus/Deficit) July/September / / Transportation Travel Government Services Other Services 5/2/1/3- Investment Income Balance Investment income deficit rolled back by 2.6 percent, to only US$ 1.12 billion (against US$ 1.15 billion), mainly as an outcome of the following developments: - The decrease in investment income receipts by 19.4 percent to US$ 81.6 million (against US$ million), because of the retreat in both profit transfers from branches abroad and interest payments and dividends of bonds and securities. - The decline in investment income payments by 4.0 percent to US$ 1.2 billion (against US$ 1.3 billion), driven by the retreat in profit transfers of foreign petroleum companies & foreign companies operating in Egypt; transfers of interest payments & dividends of bonds and securities; and interest payments by EGPC. US$ bn Investment Income Balance Q1 Q2 Q3 Q4 Q1 2015/ /2017 Investment Inco me Receipts Investment Inco me Payments Investment Inco me Balance

73 -65-5/2/1/4- Net Unrequited Current Transfers Unrequited current transfers (net) stepped back by 21.3 percent to US$ 3.39 billion (from US$ 4.32 billion), as a consequence of the following developments: - The retreat in net private transfers to US$ 3.36 billion (from US$ 4.29 billion), due to the decline in remittances from Egyptians working abroad by 22.3 percent. - The rise in net official transfers to US$ 33.8 million (from US$ 21.9 million), because of higher cash grants received by the Egyptian government. Egyptian Workers Remittances as a Percentage of GDP US $bn Q1 Q2 Q3 Q4 Q1 2015/ /2017 Egyptian Workers Remittances Egyptian Workers Remittances as a Percentage of GDP % /2/2- Capital and Financial Account During July/Sept. 2016/2017, the capital and financial account achieved a net inflow of US$ 7.1 billion (against US$ 1.6 billion), as a reflection of the following developments: The net inflow of FDI in Egypt scaled up to US$ 1.9 billion (against US$ 1.4 billion). This was a result of the hike in net inflows of oil sector investments by US$ million, reaching US$ million (against US$ million). Add to this the rise in net greenfield investments by 23.9 percent, to US$ 1.4 billion (against US$ 1.1 billion).

74 -66- The following table shows the sectoral distribution of total FDI flows to Egypt during the periods of review and comparison: Activity Sector 2015/2016 * Share (%) July/Sept. (US$ mn) 2016/2017 * Share (%) Total FDI Flows to Egypt Oil Manufacturing Agriculture Construction Services, of which: Real estate Finance Tourism Communications & IT Other services Undistributed * Preliminary. Portfolio investment in Egypt achieved a net outflow of US$ million (against US$ 1.4 billion). This was primarily due to the Egyptian authorities' repayment of bonds that had fallen due in the reporting period in the amount of US$ 1.0 billion (outflow). Medium- and long-term loans and facilities unfolded net disbursements of US$ million (against net repayments of US$ million), as an outcome of the increase in total disbursements to US$ 1.8 billion (against US$ million) and in total repayments to US$ million (against US$ million). Short-term suppliers' credit posted net disbursements of US$ million (against US$ 1.4 billion).

75 -67- Other assets and liabilities (the change in banks' foreign assets and liabilities; the CBE non-reserve foreign assets and foreign liabilities; and the counterpart to some items included in the current account) recorded a net inflow of US$ 4.8 billion (against US$ million). This was primarily a result of the pickup in the net change in liabilities of the CBE to the external world, registering a net inflow of US$ 3.4 billion in the reporting period (against US$ 1.2 million). The net change in banks' liabilities rose, recording as such a net inflow of US$ 1.6 billion (against US$ million). US $bn Net Foreign Investments in Egypt Q1 Q2 Q3 Q4 Q1 Net FDI in Egypt 2015/ /2017 Net Portfolio Investment i n Egypt

76 -68-5/3 - Foreign Trade In July/Sept. 2016/2017, Egypt's foreign trade declined to US$ 19.2 billion (against US$ 19.5 billion in the same period of the previous FY), constituting 5.2 percent of GDP. The retreat comes on the back of the increase in export proceeds by US$ million to US$ 5.3 billion, or 1.4 percent of GDP (due to the rise in non-oil exports by US$ million). In addition, import payments declined by US$ million to US$ 13.9 billion or 3.8 percent of GDP (because of the drop in non-oil imports by US$ million). Consequently, the trade deficit narrowed to US$ 8.7 billion (US$ 1.1 billion were oil balance deficit) compared to US$ 10.0 billion. 5/3/1- Structure of Export Proceeds and Import Payments First: Export Proceeds by Degree of Processing * : Export proceeds increased by US$ million, mainly due to the rise in the exports of both semi-finished goods by US$ million, and finished goods by US$ million. Meanwhile, exports of fuel, mineral oils and products declined by US$ 95.5 million, as well as exports of raw materials by US$ 37.1 million. Relative Structure of Exports Merchandise Group July/September 2016/2017 Finished Goods 44.8% Semi- Finished Goods 18.1% Fuel,Mineral Oils & products 30.1% Raw Materials 7.0% US$ bn Finished Goods Exports by Degree of Processing July/September Fuel,Mineral Oils & Products Semi-Finished Goods 2014/ / /2017 Raw Materials * Table 5/2 in the statistical annex shows the distribution of merchandise exports by degree of processing.

77 -69- Hereunder is a detailed review of the exports of different merchandise groups: A) Semi-Finished Goods: Exports of this group increased by 69.2 percent to US$ million. This was ascribed to the rise in the exports of gold by US$ million to US$ million. B) Finished Goods: Exports of this group rose by 13.0 percent, to US$ 2.4 billion. This was attributable to the surge in exports of some goods, mainly; phosphate and mineral fertilizers; milk and dairy products; medicines, serums and vaccines; and cane sugar. C) Fuel, Mineral Oils and Products: Exports of this group moved down by 5.7 percent to US$ 1.6 billion. This was ascribed to the 19.3 percent drop in crude oil exports (57.3 percent of total exports) to US$ million. However, exports of oil products (39.0 percent of total exports) rose by 15.0 percent to US$ million. D) Raw Materials: Exports of raw materials decelerated by 9.2 percent to US$ million. That was attributed to the lower exports of some goods, mainly, fresh or chilled or cooked vegetables; mineral substances; and potatoes for sowing. Second: Merchandise Imports by Degree of Use * : Import payments retreated by US$ million in the period under review. That was an outcome of the drop in the imports of investment goods by US$ million; raw materials by US$ million; fuel, mineral oils and products by US$ million; and consumer goods by US$ 49.8 million. In contrast, imports of intermediate goods picked up by US$ 58.2 million. * Table 5/3 in the statistical annex shows the distribution of merchandise imports by degree of use.

78 -70- Relative Structure Of Imports Merchandise Group July/September 2016/2017 Consumer Goods 25.4% Investment Goods 15.7% Undestributed Goods 5.5% Fuel,Mineral Oils & Products 18.9% Intermediate Goods 24.9% Raw Materials 9.6% US$ bn Fuel, Mineral Oils & Products Imports by Degree of Use July/September Raw Materials Intermediate Goods Investment Goods 2014/ / /2017 Consumer Goods Hereunder is a detailed review of the imports of different merchandise groups: A) Investment Goods: Imports of this group stepped down by 28.2 percent to US$ 2.2 billion. That was attributed to the decline in the imports of some goods, mainly; cinematographic cameras; appliances for telephone and communications; and cranes and winches. B) Raw Materials: Imports of this group decreased by 16.8 percent to US$ 1.3 billion. This was ascribed to the decline in the imports of maize (not for sowing); bamboo charcoal ; wheat; plants and parts thereof; and raw cane sugar. C) Fuel, Mineral Oils and Products: Imports of this group decreased by 7.5 percent to US$ 2.6 billion, due to the drop in the imports of crude oil (7.2 percent of total imports of this group) by 53.5 percent; and the slight decrease in oil products (90.6 percent) by 0.3 percent.

79 -71- D) Intermediate Goods: Imports of intermediate goods increased by 1.7 percent to US$ 3.5 billion because of higher imports of some goods, mainly animal and vegetable fats, greases, and oils; iron and steel (unalloyed); and hot and cold flat-rolled products. E) Consumer Goods: Imports of consumer goods declined by 1.4 percent to US$ 3.5 billion, on the back of the following developments: - Durable consumer goods fell by 9.5 percent to US$ million, due to the decline in the imports of some goods, mainly: cars for passengers; and televisions. - Non-durable consumer goods rose by 2.1 percent to US$ 2.6 billion, due to the increase of the imports of some goods, mainly: meat and offals; live, fresh, chilled or dried crustaceans; medicines; articles for the conveyance or packing of goods. 5/3/2- Sectoral Distribution of Merchandise Transactions On the level of economic sectors, the total volume of foreign trade of the public sector decreased by 14.2 percent in July/Sept. 2016/2017, whereas that of the investment sector inched up by 12.7 percent, and that of the private sector by 2.0 percent. In the meantime, the share of the public sector rolled back to 24.1 percent (against 27.6 percent) of total foreign trade. Meanwhile, the share of the private sector augmented to 64.8 percent (against 62.7 percent) and that of the investment sector to 11.1 percent (against 9.7 percent).

80 -72- Foreign Trade US$ 19.2 billion Public Sector US$ 4.7 billion Private Sector US$ 12.4 billion Investment Sector US$ 2.1 billion Exports US$ 0.5 billion Imports US$ 4.2 billion Exports US$ 3.9 billion Imports US$ 8.5 billion Exports US$ 0.9 billion Imports US$ 1.2 billion Hereunder is a detailed review of export proceeds and import payments by economic sector: A) The Private Sector Export proceeds of the private sector inched up by US$ million to US$ 3.9 billion in the reporting period. This comes on the back of the increase in exports of gold by US$ million; mineral and phosphate fertilizers by US$ 72.8 million; and milk and dairy products by US$ 46.3 million. Main exports of this sector were represented in crude oil; household electric appliances; textiles; and ready-made clothes. Meanwhile, imports of this sector decreased by US$ million to US$ 8.5 billion. This came on the back of the fall in the imports of spare parts for machinery and appliances by US$ million; bamboo charcoal by US$ million; and maize (not for sowing) by US$ million. Main imports of this group were meat and offals; passenger cars; parts and accessories for cars and tractors. B-The Investment Sector Export proceeds of investment sector augmented by US$ million to US$ million. This was mainly attributable to the rise in the exports of oil products (61.1 percent of total exports of this sector) by US$ million. The main non-oil exports were propylene polymers; textiles; and carpets and floor coverings.

81 -73- Likewise, import payments of this sector mounted by US$ 9.5 million to US$ 1.2 billion. That was attributed to the rise in imports of household electric appliances by US$ million; crude oil by US$ 84.6 million; and liquid and air pumps by US$ 27.9 million. Main imports were represented in household electric appliances; liquid and air pumps; and televisions. C) The Public Sector Export proceeds of the public sector retreated by US$ million to US$ million. That was mainly attributed to the decrease in exports of both oil products (6.2 percent of total exports of this sector) by US$ million, and crude oil (79.5 percent) by US$ million. Its key non-oil exports were aluminum and its products; and gold. Similarly, import payments of this sector rolled back by US$ million to US$ 4.2 billion. This was mainly due to the decline in the imports of crude oil (2.5 percent of the total imports of this sector) by US$ million, of wheat by US$ million, and of communications and telephone equipment by US$ 31.8 million. The key imports of this sector were oil products; animal and vegetable fats, oils, and greases; electricity generators; and medicines. 5/3/3- Geographical Distribution of Merchandise Transactions Egypt's foreign trade with Russian Federation and the Commonwealth of Independent States decreased by 52.7 percent, the Asian (non-arab) countries by 7.4 percent, and the EU countries by 6.9 percent. Meanwhile, it increased with the USA by 36.1 percent, other countries and regions by 34.1 percent, other EU countries by 18.0 percent, African (non-arab) countries by 15.5 percent, and the Arab countries by 2.5 percent. Country ranking in terms of the relative importance of trade exchange with Egypt ran as follows: the UAE ranked first (7.8 percent), followed by the USA (7.0 percent), China (6.3 percent), Saudi Arabia (5.4 percent), Italy (5.3 percent), Germany (4.7 percent), the UK (4.3 percent), and Switzerland (3.7 percent). These countries combined represented 44.5 percent of the total volume of foreign trade. Table (5/4) in the statistical section illustrates the geographical distribution of imports and exports.

82 -74- The geographical distribution of export proceeds shows that the Arab countries came in the lead (31.4 percent), followed by the EU countries (29.5 percent), and other countries and regions (11.0 percent). At the level of countries, the UAE came on top, followed by the USA, Italy, the UK, Lebanon, Switzerland, Saudi Arabia, and Germany with a combined share of 54.5 percent of total export proceeds. US$ bn 2.0 Exports by Geographical Distribution July/September EU Arab Countries Asian Countries (non- Arab) USA Other Countries & Regions Other European Countries Russian Federation African Countries (non- Arab) 2015/ /2017 Turning to import payments, the EU countries ranked first (28.6 percent), followed by the Asian (non-arab) countries (20.6 percent), and the Arab countries (19.2 percent). Concerning the order of countries, China was the main exporter, followed by the USA, Saudi Arabia, the UAE, Germany, Italy, Russia, Switzerland, the UK, Qatar, and France with a combined share of 52.1 percent of total imports. US$ bn Imports by Geographical Distribution July/September EU Arab Countries Asian Countries (non-arab) Other Eur opean Countries Other Countries & Region s USA Russia n Federation African Countries (non-arab) 2015/ /2017

83 -75-5/3/4 - Breakdown of Trade by Main Merchandise Group In July/Sept. 2016/17, the volume of trade exchange of the following groups decreased: textiles and products thereof by 10.8 percent; the electric machinery, appliances and equipment and parts thereof by 10.3 percent; crude oil and products by 8.1 percent; vehicles, cars, and other means of transportation by 6.3 percent; and cereals and mill products by 5.2 percent. However, the volume of trade exchange of foodstuffs (excluding cereals) inched up by 12.3 percent; chemicals by 9.9 percent, and base metals and products by 2.0 percent. In the meantime, crude oil and its products contributed 21.4 percent to the total volume of trade, followed by electric machinery, appliances and equipment and parts thereof (14.3 percent); and foodstuffs (12.1 percent). As for export proceeds by main commodity, crude oil and its products came first (29.0 percent), followed by foodstuffs, excluding cereals(15.5 percent), and electric machinery, appliances and equipment and parts thereof (9.2 percent). US$ bn 2.0 Exports by Main Commodities July/September Oil Foodstuffs (Ex cl. Cereals) Textile Materials & Articles Thereof Cereals & Milling Products Vehicles, Cars & Means of Transportation 2015/ /2017 Chemicals Base Metals & Products Electrical Machinery & equipment & parts thereof In terms of imports, crude oil and its products ranked first (18.5 percent), followed by electric machinery, appliances and equipment and parts thereof (16.3 percent), and foodstuffs, excluding cereals (10.8 percent). US$ bn Oil Foodstuffs (Excl. Cereals) Imports by Main Commodities July/September Textile Materials & Articles Thereof Cereals & Milling Products Vehicles, Cars & Means of Transportation 2015/ /2017 Chemicals Base Metals & Products Electrical Machinery & equipment & parts thereof

84 -76-5/4- International Finance According to the international finance data during July/Sept. 2016/2017, international finance recorded a net inflow of US$ 4.0 billion (against US$ 6.4 million in the previous corresponding period). This was an outcome of the following developments: - Net resources from abroad (inflows) rose to US$ 5.1 billion (from US$ 1.1 billion). Most of the increase was due to the rise in net external borrowing by US$ 2.9 billion and FDI in Egypt by US$ million. - Net outflow of interest payments and profit transfers retreated by US$ 11.6 million to US$ 1.1 billion. (US$ mn.) Net International Finance from Abroad during July/Sept. 2014/ / /2017 Net Interest Payments and Profit Transfers Total Net Resources from Abroad Net International Finance from Abroad Net International Finance from Abroad (US$ mn) July/Sept. 2015/ /2017* Change + (-) Net International Finance from Abroad (A+B) A- Resources from Abroad (inflow) Official grants (net) External borrowing (net)** FDI in Egypt (net) Portfolio investment in Egypt (net) (1405.8) (840.9) FDI abroad (40.3) (62.0) (21.7) 6- Portfolio investment abroad (net) (7.7) B- Interest Payments and Profit Transfers (outflow) (1116.2) (1104.6) Net profit transfers of investment in securities (46.0) (28.3) Net profit transfers of FDI (936.9) (907.2) Interest on external loans and facilities (143.2) (213.1) (69.9) 4- Net interest on deposits * Provisional. ** Including non-resident deposits

85 -77-5/4/1- Foreign Direct Investment (FDI) in Egypt During July/Sept. 2016/2017, net FDI in Egypt rose by US$ million (inflow), compared to the corresponding period of the previous FY, to US$ 1.9 billion. This was mainly a result of the increase in investment inflows by US$ million to US$ 3.4 billion and capital repatriation by US$ 11.1 million to US$ 1.5 billion. Geographical Distribution of FDI in Egypt (US$ mn) July/Sept. 2015/ /2017* Change Net Flows of FDI in Egypt (A-B) A-Total Inflows USA EU Countries (2.4) Arab Countries Other Countries (94.6) B-Capital Repatriation** * Provisional. ** Capital repatriation means that a direct investor recovers his share in the capital of an investment enterprise - in case of partial or full disposal - and transfers part or all of it abroad. The surge in investment inflows, during the period under review, was a dual effect of the increase in flows from the Arab countries by US$ million to US$ million, and from the USA by US$ million to US$ million; and the retreat in flows from the EU countries by US$ 2.4 million to US$ 2.0 billion and from the rest of the world by US$ 94.6 million to US$ million. The sectoral distribution of total FDI inflows, during the period under review, reveals that the oil sector attracted 52.9 percent of the total, followed by services (10.9 percent), manufacturing (1.5 percent), and finally construction (1.0 percent). Petroleum Sector 52.9% Undistributed 33.7% Total FDI in Egypt by Economic Sector During July/Sept. 2016/2017 Real State Sector Communication 0.7% Services 0.1% Services % 10.9 Manufacturing Sector 1.5% Construction Sector 1.0% Other Services 5.8% Financial Sector 4.3%

86 -78- The breakdown of total FDI inflows by investment purpose reveals that petroleum investments took the lead, with a share of US$ 1.8 billion or 52.9 percent of the total. Greenfield investments followed with a share of US$ 1.6 billion (46.4 percent), then investments resulting from transfers for buying real estates with US$ 24.7 million (0.7 percent). (US$bn) 4 Net FDI in Egypt during July/Sept / / / /2017 Outflows Petroleum Sector Green Field Inverstment Proceeds From Selling Local Entities to non-residents Transfers For Buying Real Estates Net Foreign Direct Inverstment in Egypt 5/4/2- External Official Grants Net inflow of official grants rose to US$ 33.8 million in July/September 2016/2017 (against US$ 21.9 million). In figures, cash grants accounted for US$ 18.3 million and in-kind grants for US$ 22.5 million. Official grants transferred abroad decreased to US$ 7.0 million (against US$ 9.8 million). Geographical distribution of net inflow of official grants during July/Sept. 2016/2017 Kuwait 2.0% Jordan 0.2% Belgium 11.8% Germany United 3.9% Kingdom 7.6% O ther 16.4% USA 58.1% According to the data of the Ministry of International Cooperation, total grant commitments went down by US$ million to US$ 26.1 million during July/September 2016/2017.