CENTRAL BANK OF EGYPT

Transcription

1 CENTRAL BANK OF EGYPT ECONOMIC REVIEW Vol. 46 No /2006 Research, Development and Publishing Sector

2 This Review, issued in Arabic and English by the Research, Development and Publishing Sector, focuses on economic developments in ARE and in the world and presents specialized studies of relevance. Opinions expressed do not necessarily reflect those of the Bank.

3 Contents Page Major Financial and Monetary Indicators National Developments Overview Monetary and Banking Developments 1/1: Monetary and Banking Policy and Monetary Aggregates /2: Banking Developments Stock Exchange 2/1: Shares Market 35 2/2: Bonds Market Public Finance and Domestic Public Debt 3/1: Consolidated Fiscal Operations of the General Government /2: Domestic Public Debt External Transactions 4/1: Foreign Exchange Market... 4/2: Balance of Payments. 4/3: International Finance. 5- Cotton 5/1: Domestic Developments. 5/2: International Developments 6- Tourism 6/1: Tourists 6/2: Tourist Nights... External Developments 7- International Economic and Monetary Developments 7/1: Economic Developments 7/2: Monetary Developments 8- International Economic Cooperation 8/1: International and Regional Meetings.. 8/2: World Bank Activity Annex - Statistical Section

4 Major Financial and Monetary Indicators July/December 2004/ /2006 % Price Index Change in consumer price index (urban) (99/2000 = 100) Change on wholesale price index (99/2000 = 100) Money and Liquidity LE bn - Reserve money Domestic liquidity (M2) of the banking system (1) Money supply (M1) Currency in circulation outside the banking system Currency in circulation / money supply (%) Deposits with Banks (2) - Total deposits, of which: Business sector deposits (public and private) Household sector deposits Deposits in foreign currencies (1 CBE and banks. (2) Excluding the CBE. + On the basis of 1986/1987 = 100

5 Bank Credit * (1) - Total credit granted by banks Government securities and bills Other securities (including the foreign sector) Loans to the government and public economic authorities Loans to the business sector ( public and private) Loans to the household sector and others Ratio of loans to deposits held with banks (%): In local currency In foreign currencies Ratio of portfolio and treasury bills to deposits held with banks (%) Foreign Assets and Liabilities of the Banking System (2) - Foreign assets ** 35.2** - Foreign liabilities ** 15.5** - Net foreign assets ** 19.7** Discount and Interest Rates July/December 2004/ /2006 AT End of Period (Per Annum %) - CBE discount and interest rate Average interest rate on 91-day treasury bills Simple interest rate on investment certificates Average interest rate on 3-month deposits with banks Average interest rate on one year or less loans with banks (1) Excluding the CBE. (2) The CBE and banks. * Includes loans, securities and bills ** In US$ billion

6 US Dollar Exchange Rate Announced by the CBE (At end of period) PT per US Dollar - Market rates Weighted average interbank rates Consolidated Fiscal Operations of the General Government 2005/2006 (LE bn) Estimates For FY Actual July/Dec. - Total revenues Total expenditures Cash Deficit Net acquisition of financial assets Overall Deficit/Surplus Total Financing Domestic financing Banking Non-banking Foreign borrowing Arrears Others Financing effects for eliminations Revaluation differences Net privatization proceeds Discrepancy Cash deficit/gdp(%) Overall deficit /GDP (%) Expenditures /GDP (%) Revenues /GDP (%) Domestic Public Debt End of June 2005 Dec Government domestic debt Public economic authorities debt NIB debt

7 Balance of Payments (US$ bn) July/December 2004/ /2006 Balance of Current Account & Transfers Trade Balance (5.1) (5.8) Merchandise exports Oil and its products % Others % Merchandise imports Intermediate goods % Investment goods % Consumer goods % Fuel, other raw materials and others % Services Balance Receipts Of which: Transportation % Travel % Investment income % Payments Of which: Transportation % Travel % Investment income % Transfers Official % Private % Capital and Financial Transactions (0.4) 2.8 Overall Surplus (Deficit) Outstanding External Debt at End of September

8 National Developments

9 - 1 - Overview During July-December of FY 2005/2006, the Egyptian economic performance continued its noticeable improvement. GDP real growth rate at factor cost rose to 5.8%, spurred by higher contributions of all sectors, mainly of mining (natural gas), manufacturing, trade and agriculture. As for the monetary policy, the CBE continued its efforts to realise the overriding objective of its monetary policy, i.e. to achieve price stability and to bring inflation down to a satisfactory and stable level. This is to help strengthen market confidence, while maintaining high rates of investment and economic growth. To this end, the CBE has developed a new framework for monetary policy implementation, which uses, as an operational target, the overnight interest rate on interbank transactions, instead of banks excess reserve balances. This represents the CBE's main policy instruments, providing the outer bounds of a corridor within which the ceiling is the overnight interest rate on lending from the Bank, and the floor is the overnight deposit interest rate at the Bank. On 5 June 2005, this framework has come into force, with the CBE Monetary Policy Committee (MPC) setting the overnight deposit and lending rates at 9.5% and 12.5%, respectively. Regarding the monetary policy instruments, the CBE issued a new instrument dubbed the CBE notes with maturities spanning up to two years. After its meeting in January 2006, the MPC reduced the overnight deposit and lending rates a number of times, to reach 8.25% and 10.25%, respectively. It is noteworthy that the MPC in the said meeting lowered the CBE lending and discount rate from 10.0% to 9.0% annually. The impact of the MPC s decisions was obvious on the overnight interbank interest rates. The weighted average of these rates dropped from 8.99% in December 2005 to 8.69% in January Likewise, interest rates on deposits and loans at banks declined during the period under review.

10 - 2 - Domestic liquidity growth slackened from 7.7% during July-December 2004/2005 to 5.8% during the same period of 2005/2006, reaching LE billion at end of December As for the counterpart assets of domestic liquidity, net foreign assets moved up by the equivalent of LE 31.9 billion or 39.4%. Likewise, domestic credit increased by LE 7.2 billion or 1.5%, as an outcome of the rise in banks' credit to all sectors, except for the government sector. Forex market transactions revealed a surplus of US$ 2.9 billion during the period under review, against a deficit of US$ 0.7 billion during the corresponding period of the previous FY. This was an outcome of the increase in resources by US$ 7.4 billion, to reach US$ 14.7 billion, and in uses by US$ 3.8 billion, to post US$ 11.8 billion. As a result, the Egyptian pound appreciated vis-à-vis the US dollar by 0.8%, as the LE exchange rate (buying) rose from pt a dollar at end of June 2005 to pt at end of December Against these positive developments, net international reserves (NIR) at the CBE augmented by US$ 2.6 billion to US$ 21.9 billion at end of December NIR continued to increase, reaching as such US$ 22.8 billion at end of April 2006 (during the printing of this Review). The CBE's monetary policy helped to lower inflation, in association with the decline in the domestic liquidity growth rate. With the resultant improvement in the value of the LE, preference for the local currency as a saving vehicle continued. Accordingly, local currency deposits as a percentage of banks total deposits rose from 67.9% at end of September 2004 to 72.5% at end of December According to the CMA statistics, the stock market showed a vigorous performance during the period under review. As such, the number of transactions on both shares and bonds climbed to 2.7 million, against 887 thousand; and the number of dealt-in securities to 3.2 billion, against 1.2 billion. Moreover, the value of these securities quadrupled their value of the corresponding period, thereby reaching LE billion, against LE 24.2 billion.

11 - 3 - As to foreigners' transactions on the Egyptian Exchange, the notably active trading on the Exchange helped attract further investors, and led to a considerable rise in the value of their transactions (purchases and sales), as compared with the corresponding period of the previous FY. As such, their purchases and sales in LE and US$ rose to LE 28.1 billion and LE 27.2 billion, respectively. Accordingly, foreigners' transactions unfolded net purchases of LE 0.9 billion during July- December of FY 2005/2006, mostly on Egyptian pound securities. As for the fiscal policy, the execution of the consolidated fiscal operations of the general government (the budget sector, NIB and SIFs) during the statement period revealed that total revenues amounted to LE 65.4 billion and total expenditures to LE 80.8 billion. This resulted in a cash deficit of LE 15.4 billion. Adding the net acquisition of financial assets of LE 6.5 billion to the aforementioned amount, the overall deficit reaches LE 21.9 billion. As a reflection of the above developments, total domestic public debt rose by about LE 13.8 billion during July-December , to reach LE billion at end of December 2005; of which claims on the government accounted for 68.2%. As for the transactions with the external sector during the first half of FY , the surplus on the BOP current account declined to only US$ 1.1 billion, against US$ 1.8 billion during the corresponding period of the previous FY. This was an outcome of the increase in the trade deficit and the decrease in services surplus on the one hand, and the increase in net unrequited transfers on the other. Trade deficit widened by 15.1%, as a result of the rise in merchandise import payments by 26.3% in spite of the 35.4% growth in merchandise exports (ascribable mainly to buoyant export earnings of oil and products thereof, driven by the increase in both the volume of oil exports and world oil prices). In the meantime, services surplus declined by 5.7% due to the rise in service payments by 40.4% and the limited increase in service receipts by only 13.5%. The increase in service receipts was mainly an outcome of higher travel, transport and investment income receipts. Net unrequited transfers stepped up as a main result of the remarkable increase in the remittances of Egyptians working abroad. The capital

12 - 4 - and financial account unfolded a net inflow of US$ 2.8 billion during the period, against a net outflow of US$ 0.4 billion during the corresponding period of the previous FY. Against this backdrop, the BOP revealed an overall surplus of US$ 2.6 billion during the statement period, against US$ million in the period of comparison. Regarding international finance, resource inflows rose by US$ 3.1 billion to US$ 6.8 billion during July-December 2005/2006, due mainly to the increase in foreign investment in Egypt (direct and portfolio). Egypt s external debt denominated in US dollar totaled US$ 29.7 billion (mostly owed by the public sector) at end of December 2005, denoting an increase of US$ 0.7 billion compared with the end of June This increase reflected the pick-up in net disbursements of loans and facilities by some US$ 1.2 billion and the decline in the balance of external debt by US$ 0.5 billion. The latter decline was a main outcome of the depreciation of most currencies of borrowing vis-à-vis the US dollar at end of December As for the external debt service, the debt service as a percentage of current receipts (including private and official transfers in the BOP current account) improved during the period under review, declining to 6.8% from 7.2% during the period of comparison. Likewise, the debt service to total exports of goods and services ratio fell to 7.9% from 8.5%. As for tourism during July-December 2005/2006, as compared with the corresponding period of the previous FY, the CAPMAS statistics revealed that tourism revenues stepped up by 12.0%, to reach US$ 3.9 billion. This was due to a 13.3% increase in the estimate of the average tourist spending per night. As for the financial and economic reform agenda, the period witnessed a number of important measures. Mainly, the CBE was allowed to seek the services of four of the world best investment managers to manage its foreign exchange reserves and the CBE portfolio abroad. Moreover, the Mohandes Bank and the Bank of Commerce and Development (Al Tegareyoon) were merged into the

13 - 5 - National Bank of Egypt. An approval was also granted for BLOM Bank to acquire 100% of the issued and paid-up capital of Misr Romanian Bank. It was also agreed in principle to raise the stake acquired by either HSBC (Egypt) (S.A.E.) or the Consortium of Calyon Bank and MIMID to 100% of the issued and paid-up capital of the Egyptian American Bank. In addition, it was decided to establish a committee that will draft the Central Bank s directions concerning the implementation of governance rules for the establishment of banks' boards of directors. In the field of customs and tax reforms, the executive regulations of the Law of Custom Exemptions and the Income Tax Law were issued. Concerning exportation and importation, the Executive Regulations of the Law no. 118 of 1975 on Import and Export were also issued. At the same time, the Law of the Organization of the Ministry of Social Solidarity was issued to achieve an optimum utilization of financial and in-kind resources. Also, the Law Establishing the Ministry of Planning and Local Development was issued to activate regional planning mechanisms needed to ensure a fair distribution of investments. Moreover, the Law Organizing the Ministry of Trade and Industry was issued to develop and modernize the national industry. It was also decided that the Minister of Finance is be responsible for implementing the social insurance regulations.

14 Monetary and Banking Developments 1/1: Monetary and Banking Policy and Monetary Aggregates Pursuant to Article (5) of Law No. 88 of 2003 regarding the Central Bank, the Banking Sector and Money, the Central Bank continued its efforts to realize price stability as the overriding objective of its monetary policy. In other words, the CBE works to bring inflation down to a low and stable level that helps deepen market confidence, while spurring the country s economic growth. To this end, a coordinating council was established under the chairmanship of the Prime Minister, and with the membership of Ministers of Finance, Planning and Investment, the Governor of the CBE and his two deputies, and six members who have international expertise in economic, banking and financial affairs (Presidential Decree No. 17 for 2005, issued on 12 January 2005). The Coordinating Council determines the monetary policy targets that ensure price stability and banking system soundness, within the context of the general economic policy of the State. The Prime Minister determines the issues to be referred to the Council. In this context, the Central Bank has formed the Monetary Policy Committee (MPC), under the chairmanship of the Governor of the CBE and the membership of his two deputies and some members of the CBE Board of Directors. The Committee is responsible for studying the targets of the monetary policy, the reports and information provided by the Monetary Policy Unit, in light of the targets determined by the Coordinating Council. In addition, the Committee is responsible for studying and following up the economic developments, particularly the factors affecting inflation, and studying the proposals necessary for implementing such a policy. The Committee holds its meeting at least once every two weeks. * Up till the end of December 2005, the Committee held its meeting on the third Thursday of every month, instead of the first Thursday. Afterwards, a new meeting schedule was set to be every six weeks.

15 - 7 - In its first statement in June 2005, the Committee announced the monetary policy strategy of the Central Bank and the Bank s intension to apply a formal inflation targeting framework to anchor monetary policy once the fundamental prerequisites are met. In the transition period, the CBE meets its inflation objectives by steering short-term interest rates, keeping in view the developments in credit and money supply, as well as a host of other factors that may influence inflation. The CBE has developed a new framework for monetary policy implementation. This framework relies on the use of overnight interest rate on interbank transactions, instead of the excess reserve balances of banks, as an operational target of this policy. This represents the CBE main policy instruments, providing the outer bounds of a corridor within which the ceiling is the overnight interest rate on lending from the Bank, and the floor is the overnight deposit interest rate at the Bank (the Corridor System). The MPC has announced, in its first statement, the overnight deposit and lending rates at 9.5% and 12.5%, respectively. In its regular meetings, the Committee considers, in light of requirements of price stability and the reports of the Monetary Policy Unit, whether to adjust the overnight deposit and lending rates or keep them unchanged. With respect to the monetary policy instruments, the CBE introduced a new instrument dubbed the CBE notes. These notes are issued with a maturity spanning up to two years and are used to absorb banks' excess liquidity instead of the reverse repos of treasury bills. To achieve the primary objective of the monetary policy, the Bank continued to pursue a non-expansionary monetary policy to absorb banks' excess liquidity. As such, the outstanding balance of open market operations reached LE 85.6 billion at end of December 2005 (including LE 33.8 billion as outright sales, LE 47.2 billion as transactions under the deposit acceptance mechanism and LE 4.6 billion as reverse repos), against LE 72.4 billion at end of June 2005 (of which LE 1.9 billion were outright sales, LE 35.0 billion were transactions under the deposit acceptance mechanism and LE 35.5 billion as reverse repos).

16 - 8 - Thanks to the monetary policy actions during the period under review, domestic liquidity declined to 5.8% from 7.7% during the period of comparison. This led to a decline in the CPI-based inflation rate to reach 1.9% during the period under review, against 3.4% during the corresponding period. Encouraged by the decline in inflation rate, the MPC cut the overnight deposit and lending rates a number of times and narrowed the corridor from 3% to 2%, to reach 8.75% and 10.75%, respectively at end of December It is worth mentioning that at the time of printing this Review, the Committee in its meetings in January 2006 reduced the overnight deposit and lending rates by 0.5%, to reach 8.25% and 10.25%, respectively. Likewise, the CBE lending and discount rate was lowered from 10.0% to 9.0% annually. The above said decisions of the MPC had a tangible impact on the overnight inter-bank interest rates. The weighted average of these rates declined to 8.69% during January 2006 (against 8.99% during December 2005, 9.32% during September 2005 and 9.64% during July 2005). These decisions also led to a drop in the interest rate on deposits and loans at banks as shown in the following table. CBE Lending and Discount Rate and Bank's Average Interest Rates on Deposits and Loans June December June December* CBE lending and discount rate Three-month deposits Six-month deposits One-year deposits Loans of one-year or less * Provisional. The said monetary policy actions, together with the activation of the interbank foreign currency market (the dollar interbank system) have helped strengthen the preference for the local currency as a saving vehicle and as a store of value. This was especially true with the improvement in the LE exchange rate and the expected sustainability of this trend. Accordingly, time and saving deposits

17 - 9 - in local currency contributed the bulk of the annual growth of broad money (M2), compared with a negative contribution of time and saving foreign currency deposits, denominated in local currency, in the period under review.( see the following table). Share of Domestic Liquidity (M2) Components in its Growth (% Annually) At End of June Dec. June Dec. Local currency time & saving deposits Foreign currency time & saving deposits (denominated in local currency) 3.0 (1.0) (1.3) (1.6) Others Broad money (M2) The LE exchange rate continued to improve against the US dollar in the foreign currency interbank market during July-December, 2005/2006. The LE weighted average stood at LE 5.74/dollar at end of December 2005, against LE 5.78/dollar at end of June Net international reserves rose from US$ 19.3 billion at end of June 2005 to US$ 21.9 billion at end of December 2005, then to US$ 22.8 billion at end of April 2006 (during the printing of this Review). 1/1/1: Reserve Money Reserve money decreased by LE 14.2 billion or 8.0% during July-December of FY 2005/2006, (against an LE 16.1 billion increase or 13.6% during the corresponding period of the previous FY), to reach LE billion at end of Dec The decrease was an outcome of an LE 20.1 billion drop in banks' local currency deposits and an LE 5.9 billion increase in currency in circulation outside the CBE. The decline in banks' local currency deposits at the CBE during the period was ascribed to the modifications made on the accounting treatment of the balance of Egyptian TB reverse repos according to the CBE Board of Directors decision No issued on August 2, As per this treatment, the balance of

18 reverse repos included in the government portfolio of the CBE balance sheet was crossed out, and the value of this balance was deducted from banks' local currency deposits at the CBE. The decision also stated that as far as banks balance sheets are concerned, these reverse repos are to be added to the item treasury bills and deducted from the balances held at the CBE. Reserve Money and Counterpart Assets (LE mn) Balances at End of Change during July-December December 2004/ / Value % Value % A- Reserve Money (14214) (8.0) - Currency in circulation outside the CBE Banks' deposits in local currency (20146) (18.2) B- Counterpart Assets (14214) (8.0) - Net Foreign Assets (1043) (10.6) Foreign Assets Gold Foreign securities Foreign currencies Foreign Liabilities (2505) (3.5) - Net Domestic Assets (30937) (22.0) - Claims on the Government (Net) (20153) (16.5) Claims, of which: (53225) (23.4) Government securities (43585) (21.0) Deposits (33072) (31.5) - Claims on Banks (Net) (2.7) (90.6) Claims Foreign currency deposits (11) 0.0 (8835) (26.3) - Other items (net) (30710) (76.3) Assets Liabilities, of which: Equities Provisions

19 A breakdown of the counterpart assets of reserve money shows that net domestic assets went down by LE 30.9 billion during the period, while net foreign assets augmented by LE 16.7 billion worth. The decline in net domestic assets was ascribed to a decrease in the CBE's net claims on the government by LE 20.1 billion. This was an outcome of the LE 53.2 billion drop in the CBE claims on the government (due to the aforementioned accounting treatment) on the one hand, and the LE 33.1 billion decline in the government's deposits at the Central Bank. The decline in government deposits was because part of the TBs counterpart deposits held for the account of the Ministry of Finance has fallen due, and another part has been subject to early redemption. Moreover, other items (net) -net unclassified assets & liabilities and capital accounts- fell by LE 30.7 billion. This decline was mitigated by the rise in CBE net claims on banks by LE 19.9 billion due to its higher claims on banks (by LE 11.1 billion) on the one hand, and banks' lower foreign currency deposits therewith (by LE 8.8 billion worth) on the other. Net foreign assets of the CBE increased during the period by LE 16.7 billion worth, as a reflection of a rise in its foreign assets by LE 14.2 billion worth and a decline in its foreign liabilities by LE 2.5 billion worth. 1/1/2: Banknote Issue The balance of banknote issue (including subsidiary coins) augmented by LE 6.2 billion or 9.2% during July/December, 2005/2006, against LE 4.2 billion and 7.1% during the corresponding period of the preceding FY, to reach LE 74.0 billion at end of December 2005.

20 Banknote Issue and Change Rates* (LE mn) At End of Change during Balance of Annual Change July-December Banknote Issue Value % Value % June Dec June Dec June Dec * Including subsidiary coins issued by the Ministry of Finance. The increase in banknote issue led to a rise of LE 5.9 billion or 8.8% in the currency in circulation outside the CBE, to reach LE 73.2 billion at end of December A breakdown of currency in circulation outside the CBE by denomination showed a rise in the circulation of the LE 100 note, to register 40.9% of the total currency in circulation at end of December 2005, against 37.7% at end of June Meanwhile, the LE 20 note dropped from 15.2% to 13.3%, and so did the LE 10 note from 7.4% to 6.3% and the LE 5 from 1.9% to 1.7%. As for the rest of the denominations, they remained almost unchanged at their level of June Accordingly, the average value per note rose to LE at end of December 2005, against LE at end of June 2005, up by 1.3% during the period under review.

21 Currency in Circulation outside the CBE* (LE mn) Denominations Change during June 2005 December 2005 July-Dec. Relative Relative Value Value Importance Importance Total Subsidiary coins Pt Pt LE LE (2.1) LE (2.3) (7.5) LE (5.3) LE LE * Representing the difference between banknote issue and cash at the CBE. 1/1/3: Clearing Houses Activity and SWIFT Local Services Data on banking transfers (Fin-Copy) indicate that the number of executed LE transfers through the SWIFT system rose by 36.5 thousand during July- December, , to post thousand transfers. Likewise, their value increased by LE billion to LE billion at end of December As for the inter-bank transactions in the US dollar according to the Fin-Copy system applicable as of September 19, 2004, the number of executed transactions amounted to 5531, at a value of US$ 17.1 billion during July-December, , against 2732 transactions and a value of US$ million during the corresponding period of the previous FY.

22 During SWIFT Local Service Activity Number of Executed Transfers (unit) Value of Executed Transfers (LE mn) (LE mn) Change during the Period Number Value (27588) July-Dec July-Dec Statistics of Cairo, Alexandria and Port Said clearing houses revealed stability in the number of exchanged cheques and a rise in their value during the period, as compared with the corresponding period of the previous FY. As a result, the average value per cheque rose from LE 27.8 thousand to LE 30.4 thousand. CBE Clearing Houses Activity During Number of Cheques Value of Cheques Change during the Period (000 s) (LE mn) Number Value (9.6) (4.3) (2.8) 5.7 July-Dec July-Dec (0.2) 9.1 1/1/4: Domestic Liquidity and Affecting Factors Domestic liquidity (M2) expanded by LE 28.4 billion or 5.8% during July- December of FY , against LE 33.4 billion and 7.7% during the corresponding period of the previous FY, to reach LE billion at end of December 2005.

23 Domestic Liquidity Structure (LE mn) Change during July-December End of December Balances Relative Importance Value % Value % Domestic Liquidity (M2) Money Supply (M1) Currency in circulation outside the banking system Local currency demand deposits Quasi-money Local currency time and saving deposits Foreign currency deposits Demand deposits Time and saving deposits The rise in domestic liquidity during the period came as a reflection of the increase in its main components: money supply and quasi-money. Money supply stepped up by LE 11.0 billion or 12.3% (compared with LE 5.8 billion and 7.5%) reaching LE billion or 19.3% of total domestic liquidity at end of December The pick up in money supply (M1) was due to the increase in the currency in circulation outside the banking system by LE 5.9 billion or 9.4%, and in the LE demand deposits by LE 5.1 billion or 19.1%. The growth in the deposits of the private business, household and public business sectors was the main propeller for the rise in demand deposits.

24 L.E. bn Domestic Liquidity (End of December) Foreign currency deposits Time &saving deposits in local currency Currency in circulation outside the banking system Demand deposits in local currency Quasi-money increased by LE 17.4 billion or 4.3%, against LE 27.5 billion and 7.7%, to reach LE billion or 80.7% of total domestic liquidity at end of December The increase in quasi-money reflects the growth in time and saving deposits in local currency by LE 13.7 billion or 4.9%, to reach LE billion. This is in addition to the rise in foreign currency deposits (demand, and time & saving) by LE 3.7 billion worth or 3.0%, to reach LE billion. Deposits of the household sector contributed the bulk of the rise in local currency time & saving deposits. Specifically, its deposits grew by LE 13.0 billion during the period, whereas the deposits of the public business sector went up by only LE 0.8 billion. On the other hand, the increase in foreign currency deposits was due to the fact that deposits of both the private and public business sectors grew by LE 4.1 billion and LE 0.7 billion worth, respectively. On the other hand, the household sector deposits declined by the equivalent of LE 1.1 billion.

25 It is noteworthy that local currency deposits still contribute the bulk of total deposits. They accounted for 72.5% of the total at end of December 2005, against 71.9% at end of June This attests to the confidence of depositors in the Egyptian pound, especially with the ongoing improvement in the value of the Egyptian pound vis-à-vis the US dollar, as well as the higher interest rate on LE deposits compared with those in US dollar. LE bn Non-Government Deposits at Banks (End of December) Local currency Foreign currencies

26 Counterpart Assets of Domestic Liquidity (LE mn) Change during July-December End of December Balances Relative Importance Value % Value % Counterpart Assets of Domestic Liquidity Net Foreign Assets With the CBE (1043) (10.6) With other banks Domestic Credit Government (net) (8713) (5.4) Public business sector Private business sector Household sector Other Items (Net) (35) 0.1 (10629) 19.8 Clearly shown in the counterpart assets of domestic liquidity was the expansionary effect of both domestic credit and net foreign assets and the increase in the negative balance of other items (net). Domestic credit rose by LE 7.2 billion or 1.5% during the period, against LE 23.3 billion and 5.5% during the corresponding period, to reach LE billion at end of December The increase reflected the pick-up in the credit granted to all sectors during the period, with the exception of the government sector. Credit to the private business sector (mainly securities) mounted by LE 7.2 billion or 3.2%, raising its debt balance to banks to LE billion, or 49.7% of total domestic credit at end of December Credit to the public business sector increased by LE 4.4 billion or 11.6%, bringing its debt up to LE 41.8 billion or 8.8% of the total credit at end of December 2005.

27 The share of the household sector moved up by LE 4.3 billion or 10.5%, thereby raising its stock of debt to LE 45.6 billion, or 9.6% of the total credit. The increase in domestic credit was mitigated by a decline of LE 8.7 billion or 5.4% in the net credit to the government sector during the period; hence its debt balance stood at LE billion or 31.9% of total domestic credit at end of December This was mainly attributed on the one hand to a decline in loans to the government and the banking system holdings of government securities and treasury bills by LE 43.2 billion, and to a decrease of LE 34.5 billion in government deposits. It is worthy to note that the drop in government deposits was an outcome of the decrease in its local currency deposits by LE 41.1 billion and the increase in those in foreign currencies by the equivalent of LE 6.6 billion. L.E. bn Domestic Credit (By Sector) (End of December) Government (net) Private business sector Public business sector Household sector

28 Net foreign assets of the banking system remarkably increased during the period by the equivalent of LE 31.9 billion or 39.4%, against a rise of only LE 10.1 billion worth and 22.3%, to reach LE billion worth at end of December This was mainly a result of a pickup in net foreign assets of both the Central Bank and banks by the equivalent of LE 16.7 billion and LE 15.2 billion, respectively. Net Foreign Assets of the Banking System (LE mn) June 2005 December 2005 Change in Net during July- Dec. Foreign Foreign Foreign Foreign Net Net Assets Liabilities Assets Liabilities Total CBE (1043) Banks The negative balance of other items (net) moved up by LE 10.6 billion during the period, to reach LE 64.4 billion at end of December The rise was an outcome of banks' increase of their capital, reserves and provisions on the one hand, and of the decrease in unclassified assets and liabilities (net) on the other.

29 - 21-1/2: Banking Developments 1/2/1: Overview of Banks' Aggregate Financial Position During July-December of FY 2005/2006, the aggregate financial position of banks rose by LE 45.0 billion or 6.4% (against LE 49.4 billion or 6.4% during the corresponding period of the previous FY) to reach LE billion at end of December Aggregate Financial Position of Banks (LE mn) June 2005 December 2005 Change during July/December End of 2004/ 2005/ Relative Relative Value Value Importance Importance % % Cash (6.2) Securities & investments Balances at banks abroad Balances at CBE (6.7) 2.8 Balances at banks in Egypt (9.5) 1.6 Loan & discount balances Other assets (Assets = Liabilities) Capital Reserves (5.2) (2.4) Provisions Bonds & long-term loans (5.2) 31.9 Obligations to banks abroad (9.1) (19.3) Obligations to CBE Obligations to banks in Egypt (10.0) (7.0) Deposits Other liabilities

30 On the liabilities side, the increase was mainly due to the fact that deposits stepped up by LE 20.5 billion or 3.9% (to LE billion or 72.0% of total liabilities at end of December 2005), and other liabilities by LE 11.9 billion. As for assets, the rise was mainly ascribed to a pickup of LE 12.8 billion in the balances at banks abroad, of LE 8.6 billion in investments in securities and TBs, and of LE 8.2 billion in loan and discount balances. The increase in banks' local investments was an outcome of the rise in banks' investments in government bonds (LE 9.3 billion), equity participations (LE 6.9 billion) and CBE notes (LE 23.9 billion) on the one hand, and a drop in non-government bonds (LE 0.4 billion) and treasury bills (LE 31.6 billion), on the other. As for foreign investments, they mounted up by LE 0.5 billion. Portfolio Structure (%) End of In Local Currency June 2005 December 2005 In In In Foreign Total Local Foreign Currencies Currency Currencies Total Local Investments Treasury bills Government bonds Non-government bonds Equity participations CBE notes Foreign Securities Total Total Portfolio (LE bn) Transactions of banks in Egypt with their correspondents abroad unfolded a rise in their net credit balances by the equivalent of LE 15.2 billion, to reach LE 54.1 billion worth at end of December 2005.

31 Transactions with Banks Abroad June December (LE mn) Change during July-December End of / /2006 Value % Value % Net Position Balances at banks abroad Obligations to banks abroad (40.0) (0.4) (2364) (19.3) 1/2/2: Interbank Money Market in Egypt The volume of transactions in the interbank money market in Egypt expanded in terms of deposits by LE 0.2 billion, bringing up total deposits to LE 15.5 billion at end of December This was ascribed to a rise in local currency deposits by LE 1.5 billion and a decline in foreign currency deposits by the equivalent of LE 1.3 billion. End of Volume of Interbank Money Market in Egypt June 2005 December 2005 Change during July/December 2004/ /2006 (LE mn) Value % Value % Total (1782) (8.3) Balances in local currency (798) (7.1) Balances in foreign currencies (984) (9.6) (1279) (16.0)

32 - 24-1/2/3: Deposits Deposits at banks( including government deposits) totaled LE billion or 72.0% of the aggregate financial positions of banks at end of December 2005, up by LE 20.5 billion or 3.9% during the period (against a 3.9% rise during the corresponding period of the previous FY). The bulk of the increase during the period was in local currency deposits that rose by LE 17.8 billion or 4.8%, to reach LE billion at end of December Meanwhile, foreign currency deposits moved up by only LE 2.7 billion worth or 1.8%. A breakdown of deposits by maturity shows that time and saving deposits, in both local and foreign currencies, still represent the bulk of deposits. As such, time and saving deposits in local currency mounted by LE 12.2 billion or 3.8%, to reach LE billion or 87.1% of total local currency deposits, whereas those in foreign currencies grew by the equivalent of LE 2.2 billion or 1.9%, reaching LE billion worth or 80.1% of total foreign currency deposits.

33 Banks Deposits by Type and Currency (LE mn) End of June 2005 December 2005 Change during July/December 2004/ /2006 Value % Value % Total Deposits In Local Currency Demand Time and saving Blocked or retained (1010) (7.1) (608) (4.8) In Foreign Currencies Demand Time and saving Blocked or retained (507) (5.0) Time and saving deposits and saving systems at banks went up by LE 13.8 billion or 5.1%, to reach LE billion at end of December This was mainly due to the LE 10.2 billion rise in saving systems (as an outcome of the LE 12.5 billion increase in three-years-or-more saving systems and the LE 2.3 billion decline in less-than-three-years saving systems) and to the LE 3.6 billion pickup in non-government time and saving deposits.

34 Time and Saving Deposits and Saving Systems at Banks by Maturity (LE mn) Change during July/Dec. End of 2004/ /2006 June Dec Value % Value % Total(1+2) Non-Gov. Time & Saving Deposits in Local Currency, of which: (4185) (2.4) a. Free Deposits (2057) (1.5) b- Blocked Deposits (317) (3.9) c- Saving Accounts (1504) (2.8) d- Others (1290) (58.5) Saving Systems Less than 3 years (687) (1.9) (2279) (31.0) 3 years or more A sectoral breakdown of deposits in local currency indicates that the household sector contributed 84.1% of the increase, as its deposits grew by LE 15.0 billion or 5.9%, to reach LE billion or 69.5% of total local currency deposits. The increase in foreign currency deposits was an outcome of larger deposits of the private business sector by the equivalent of LE 4.1 billion and of the public business sector by LE 0.7 billion worth. In contrast, deposits of the household sector rolled back by LE 1.2 billion worth, the external sector by the equivalent of LE 0.8 billion and the government sector by LE 0.2 billion worth.

35 L.E. bn Local Currency Deposits in Local and Foreign Currencies (End of December) Foreign Currencies Government sector Public business sector Private business sector Household sector Foreign sector Deposits at Banks by Sector (LE mn) Change during July/December End of June 2005 Dec / /2006 Value % Value % Total In Local Currency Government sector (1335) (2.3) Public business sector (283) (1.8) Private business sector Household sector External sector (358) (48.2) In Foreign Currencies Government sector (180) (0.7) Public business sector Private business sector Household sector (1175) (1.4) External sector (108) (14.2) (767) (38.6)

36 - 28-1/2/4: Lending Activity During July/December, 2005/2006, credit facilities extended by banks increased by LE 8.2 billion or 2.7%, against LE 0.9 billion and 3.9% during the corresponding period of the previous FY, thus reaching LE billion at end of December This increase was a reflection of the rise of LE 4.3 billion in local currency facilities and of LE 3.9 billion worth in those in foreign currencies. Banks' Credit (LE mn) Change during July-Dec. End of 2004/ /2006 June 2005 Dec.2005 Value % Value % Total In Local Currency Government sector (317) (3.2) (254) (2.3) Public business sector Private business sector (1455) (0.9) (4085) (2.7) Household sector External sector In Foreign Currencies Government sector (765) (6.9) Public business sector (142) (2.0) Private business sector Household sector (20) (1.9) External sector (26) (2.0)

37 The rise in local currency facilities was attributed to an increase in the loans granted to the public business sector by LE 4.4 billion, to the household sector by LE 4.0 billion and to the external sector by LE 0.2 billion. Meanwhile, loans to the private business sector decreased by LE 4.1 billion and to the government sector by LE 0.2 billion. The pickup in foreign currency facilities was a main result of the rise in loans granted to the private business sector by the equivalent of LE 4.2 billion. Credit by Economic Activity (LE mn) Change during July/Dec. End of June 2005 Dec / /2006 Value % Value % Total In Local Currency Agriculture (353) (7.0) (1) 0.0 Manufacturing Trade (2915) (6.0) Services (518) (0.9) (1031) (1.7) Unclassified sectors (including the household) In Foreign Currencies Agriculture (4) (0.7) Manufacturing (6) (0.0) Trade Services (182) (0.8) Unclassified sectors (including the household) (12) (0.5)

38 A breakdown of credit facilities by economic activity shows that the manufacturing sector received 37.8% of total credit at end of December The services sector obtained 26.6% of the total, the trade sector 18.3%, the agriculture sector 2.1% and the unclassified sectors 15.2%. A breakdown of loans and advances by maturity and currency shows that banks extended more long-term loans (more than one year) during the period under review, up by LE 3.5 billion or 2.9%, to reach LE billion or 39.2% of the total. Loans and Advances by Maturity and Currency* Change during July-Dec. (LE mn) End of June 2005 Dec / /2006 Value % Value % Total One Year or Less In Local Currency In Foreign Currencies More Than One Year In Local Currency In Foreign Currencies * Excluding discounted commercial papers.

39 Stock Exchange The policies and measures adopted in earlier periods to improve the Stock Exchange performance began to reap fruits during July/December, 2005/2006. This was particularly true with the offering of a 20-percent stake in Telecom Egypt for sale under the privatization program during the reporting period, leading to new entrants in the market. As a reflection of the distinguished performance of the Egyptian Stock Exchange during 2005, it was rated among the world's ten top emerging stock markets by some international institutions. In the field of regulating the Stock Exchange activity and increasing the degree of disclosure and transparency, the T+0 system was introduced by virtue of a decision of CMA Board of Directors. According to this system, an investor may sell and buy shares and settle the transactions thereof in the same trading session. The system was applied to 17 shares chosen according to criteria set by the Exchange and approved by the CMA. It may also be applied to other securities, provided that they meet the set criteria. Moreover, the Egyptian Stock Exchange, in cooperation with Egypt for Information Dissemination Company (EGID), has made preparations for launching the electronic disclosure system for 17 listed companies whose shares represent 58% of the total value of market capital. This aims to ensure easy and rapid flow of information that must be disclosed by the listed companies and announced to all dealers on the Exchange. As a consequence of issuing the Executive Regulations governing securitization transactions at end of 2005, public subscription was opened for the first securitization transaction. In this context, some financial obligations related to certain car finance operations were securitized in the amount of LE 140 million and a fixed annual interest rate of 11%. As part of the efforts exerted to attract foreign investments and enhance the status of the Egyptian Stock Exchange among emerging markets, ABN-Amro, in cooperation with Cairo and Alexandria Stock Exchanges (CASE), issued 50 openend dollar certificates, derived from CASE 30 indicator, in four international

40 financial markets (Switzerland, Amsterdam, Frankfurt and Italy). These certificates began to be tradable on the Swiss Exchange as of the 31 st of October On the same date, the World Federation of Exchanges (WFE) officially decided that CASE will join the Federation as a full fledged member, making Egypt the first Arab country to be given such a membership. Moreover, Telecom Egypt issued Global Depositary Receipts that were traded on London Exchange on the 14 th of December According to the indicators of overall dealing on the Stock Exchange during July/December, 2005/2006, the number of transactions on shares and bonds reached 2.7 million, against 887 thousand in the corresponding period. The number of dealt-in securities also increased to 3.2 billion, against 1.2 billion, with a value of LE billion, exceeding fourfold the figure realized in the corresponding period (LE 24.2 billion). Of this amount, shares accounted for 96.3%. Indicators of Overall Trading on the Stock Exchange No. of Transactions (000s Units) Amount of Dealtin Securities (mn) Value of Dealtin Securities (LE bn) July/December 2005/2006 Total Shares Bonds July/December 2004/2005 Total Shares Bonds

41 The period witnessed a growing interest among individuals to invest in the Exchange, as their trading value represented 62.7% of the total value of dealings during December 2005, against 46.7% during June % Retail vs. Institutional Investors in Terms of Percentage of Value Traded Jun - 05 Jul Aug Sep Oct Nov Dec Retail Institutions Moreover, the value of foreigners' transactions (sell and buy) increased during the period. Their purchases and sales (in Egyptian pound and US dollar) mounted to LE 28.1 billion and LE 27.2 billion, respectively. This unfolded net purchases of LE 0.9 billion during July/December, 2005/2006 (the same figure of the preceding corresponding period).

42 Foreigners' Trading on the Stock Exchange July/December During 2004/ /2006 Egyptian US Dollar Egyptian US Dollar Pound Pound Net Number of Transactions (Unit) Purchases Sales Net Volume of Securities (mn) Purchases Sales Net Value of Securities (mn) Purchases Sales Source: Capital Market Authority Foreigners' transactions on LE securities revealed net purchases of LE 2.3 billion (against LE 0.9 billion in the comparison period). On the other hand, their transactions in US dollar unfolded net sales of US$ million (against US$ 5.8 million).

43 - 35-2/1: Shares Market 2/1/1: Primary (Issue) Market a) New Issues During July/December, 2005/2006, the number of new issues stood at 1017 against 1054 in the period of comparison. Of these issues, 594 were for new incorporations, with 52 million shares at a value of LE 1.7 billion or 9.8% of the total value of issues. Issues to increase the capital of existing companies reached 423, with the number of shares reaching 1.1 billion at a value of LE 16.1 billion or 90.2% of total issues. New Share Issues on the Exchange July/December 2004/ /2006 Total Number of Issues (Unit) New incorporations Capital increase of existing companies Total Number of Shares (mn) New incorporations Capital increase of existing companies Total Value of Shares (LE mn) New incorporations Capital increase of existing companies Source: CMA (Information Center)

44 b) Companies Listed on the Exchange The number of listed companies decreased to 744 at end of December 2005 (against 770 companies at end of June 2005) due to the delisting of the companies that failed to meet the listing conditions. Moreover, the nominal value of the capital of listed companies dropped from LE billion to LE billion. However, their market value mounted by 35.4%, to reach LE billion at end of December 2005 (against LE billion) as a result of the bullish market activity during the period. End of Companies Listed on the Exchange No. of Companies June 2005 Dec Capital's Capital's No. of Capital's Nominal Market Companies Nominal (LE mn) Capital's Market Value (Unit) Value Value (Unit) Value Total Listed on official schedules Listed on unofficial schedules Listed on the transitional schedule Source: CASE According to the sectoral distribution of the market capital, communications accounted for 31.4% and building & construction materials for 26.9% of the total market capital at end of December The sector of finance, insurance and real estates came next at 11.3%, followed by the manufacturing sector (7.3%) and natural gas and mining (6.2%).

45 Market Capital by Sector (LE mn) End of June 2005 % Dec % Total Agriculture and fishing Building and construction materials Natural gas & mining Manufacturing Trade Finance, insurance & real estates Utilities Communications Others Source: CASE 2/1/2: Secondary (Trading) Market Share trading boomed during July/December, 2005/2006 because of the increase in the number of dealers, following the public offering of the shares of Telecom Egypt on the Exchange. As such, the trading value of shares in both Egyptian pound and US dollar (on the floor and over the counter) jumped to LE 96.7 billion, up by 345% compared with the corresponding period of the previous FY. The trading value of shares on the floor scored LE 91.6 billion or 94.9% of the total. The trading volume in LE shares accounted for 94% of the total trading on the floor, whereas that in US dollar represented only 6%. At the sectoral level, trading in listed shares showed that the manufacturing sector continued to be in the lead (in terms of the value, volume and number of implemented transactions in both LE and US dollar). The finance, insurance and real estates sector came next, followed by services, then transportation, communications, electricity, natural gas and health.

46 The volume of dealing in shares over the counter, mostly in Egyptian pound, reached LE 5.0 billion, or 84.4% of the total OTC dealings during the period. Domestic indices of share prices reflected the good performance of the Egyptian Stock Exchange during The Capital Market Authority Index (CMAI) denoted a rise of 27% during July/December 2005/2006, recording points at end of December 2005, against points at end of June Index Number of Share Prices by Sector Jun-05 Sept-05 Dec-05 Agriculture Mining Construction Manufacturing Transportation Trade Finance&Insurance Services The CASE 30 including the top 30 companies in terms of liquidity and activity recorded a remarkable increase of 31% during the period, posting points at end of December 2005, against points at end of June 2005.

47 Cairo & Alex. Stock Exchange Index (CASE30) - Capital Market Authority Index (CMAI) CASE 30 CMAI June -04 Sept. -04 Dec. -04 March -05 June -05 Sept.-05 Dec /2: Bonds Market 2/2/1: Primary (Issue) Market The nominal value of issued bonds (listed) mounted by LE 16.7 billion during July/December 2005/2006, thereby reaching LE 52.0 billion at end of December The increase was an outcome of a pickup in treasury bonds under the primary dealers system by LE 18.0 billion and in corporate bonds by LE 1.0 billion. This is besides the amortization of treasury bonds, bank bonds and US dollar development bonds in the amount of LE 1.5 billion, LE 0.4 billion and the equivalent of LE 0.4 billion, in order.

48 Bonds Listed on the Exchange (LE mn) End of June 2005 December 2005 Value % Value % Total Government Bonds Treasury bonds Treasury bonds (primary dealers system) Housing bonds US dollar development bonds Corporate Bonds Bank Bonds Source: CASE Government bonds accounted for 85.9% of total listed bonds at end of December 2005, followed by corporate bonds (11.8%) and bank bonds (only 2.3% of the total). 2/2/2: Secondary (Trading) Market Dealings in the bond market during the period under review revealed an increase in the number of implemented transactions and the volume and value of dealt-in securities (mostly on the floor). LE bonds were traded only on the floor during the period and their volume reached 3.8 million papers, through 285 transactions, with a value of LE 3.4 billion, up by LE 0.9 billion compared with the corresponding period of the previous FY.

49 Trading in Listed Bonds on the Floor During No. of Transactions (Unit) July /December 2004/ /2006 Quantity Value No. of Quantity (000 s) (mn) Trans- (000 s) actions Value (mn) (Unit) Total Bonds (LE) Treasury bonds Treasury Bonds (primary dealers system) Housing bonds Corporate bonds Bank bonds Total Bonds (US Dollar) Development bonds Corporate bonds Source: CMA Treasury bonds (under the primary dealers system) accounted for the bulk of trading on the floor (95.6%), where the trading volume registered 2.9 million bonds at a value of LE 3.2 billion through 194 transactions. Moreover, 0.8 million corporate bonds were dealt in at a value of LE 87.1 million through 40 transactions. It is to be noted that OTC dealings were confined to US dollar bonds which amounted to 16.7 thousand bonds at a value of US$ 50.2 million through 27 transactions.

50 - 42-2/3: Mutual Funds The number of mutual funds stood at 25 at end of December 2005 (23 openend funds and two close-end ones). The nominal value of these certificates reached LE 5.6 billion and their market value LE 10.8 billion at end of December 2005 (against LE 8.4 billion at end of June 2005), registering a rise of 28.6%. Concerning the Egyptian mutual funds abroad, issuing their certificates in US$, their capital value at the time of incorporation amounted to US$ million.

51 Public Finance and Domestic Public Debt 3/1: Consolidated Fiscal Operations of General Government Egypt s fiscal policy continued its course starting from the beginning of FY 2005/2006, with a number of fiscal measures taken during October/December. For instance, the Executive Regulations of the Law governing Customs Exemptions were issued, and the basic foodstuffs that were released on temporary basis were exempted from certain customs duties. Moreover, a system for the electronic payment of customs duties was introduced to simplify import procedures and to ensure the release of consignments within the shortest possible time. As to general taxes, the Executive Regulations of the Income Tax Law were issued, while efforts continued to improve tax management. In addition, the first steps were taken to implement a plan for settling taxes due from previous periods, and new rules were issued concerning the system of advance tax payments on account. On the other side, the executive regulations of the voluntary part-time system for government and private sector employees were issued, and a pilot program of the smart ration card was launched, with the aim of controlling the provision of rationed commodities and ensuring the delivery of subsidies to those who really deserve them. The period also witnessed the promulgation of the Law for the Organization of the Ministry of Social Solidarity, with the aim of achieving an optimum utilization of resources and ensuring a fair distribution of financial and physical allocations for needy income brackets of the society. Moreover, policies were developed to improve the individuals living standard; expand the social security umbrella to cover all citizens; and identify the subsidy-deserving brackets. It was also decided that the Minister of Finance is to be responsible for implementing the regulations of social insurance. According to the Ministry of Finance, hereunder is a review of the estimates of the consolidated fiscal operations of the general government for FY 2005/2006, and the results of their execution over the course of July/December, 2005/2006.

52 - 44-3/1/1: Estimates of the Consolidated Fiscal Operations of the General Government during FY 2005/2006 Estimates of the State budget sector for FY 2005/2006 have not been revised, with revenues are targeted to reach LE billion or 22.0% of GDP, expenditures LE billion or 31.7% and the cash deficit LE 57.7 billion or 9.7%. Accordingly, the overall deficit is estimated at LE 59.4 billion or 10.0% of GDP. As to the consolidated fiscal operations of the general government (the state budget sector, NIB and SIFs), total revenues are expected to reach LE billion or 26.2% of GDP, total expenditures LE billion or 32.4% and cash deficit LE 36.7 billion or 6.2%. Accordingly, the overall deficit was estimated at LE 49.3 billion or 8.3% of GDP. The deficit in all sectors of the consolidated fiscal operations of the general government is expected to be financed by banking and non-banking domestic sources, with a minimum recourse to external sources. Some various domestic obligations are also to be paid from domestic sources after covering the deficit. 3/1/2: Follow-up of the Consolidated Fiscal Operations of the General Government during July/December, 2005/2006 First: State Budget Sector A follow-up of the execution of the fiscal operations of the state budget sector (administrative system, local administration and service authorities) during July/December, 2005/2006 indicates that total collected revenues reached LE 55.0 billion or 42.2% of the total estimated for the whole FY.

53 On the revenues side, tax receipts were the major contributor, as they scored LE 34.7 billion or 63.1% of total revenues during July/December, 2005/2006 and represented 42.5% of the estimated figure for the whole FY. Taxes on goods and services contributed LE 15.7 billion or 28.6% of total revenues during the statement period, and on individuals' income and profits from EGPC, the Suez Canal Authority (SCA) and some other units contributed LE 14.0 billion or 25.4% of total revenues. Moreover, customs duties contributed LE 4.0 billion, representing 7.3% of total revenues and 44.4% of total estimates for the whole FY. Taxes on property and some other miscellaneous taxes accounted for the rest of collected revenues. Revenues collected from property income reached LE 16.5 billion or 30% of total collected revenues, with an execution ratio of 43.5% of the total estimate for the whole year. Of this amount, 61.0% came from the EGPC, 32.8% from the SCA and 6.2% from some other economic authorities and companies. The sales of goods and services, financing investments, and some other miscellaneous revenues posted LE 3.4 billion, representing only 6.2% of total revenues. Received grants amounted to LE 0.4 billion or 0.7% of total revenues. On the other hand, expenditures registered LE 71.9 billion during the period, with an execution ratio of 38.3% of the total estimates for the whole FY. Compensations of employees accounted for LE 21.0 billion or 29.3% of total expenditures, with an execution ratio of 45.9% of the total estimated for the year. These compensations covered all wages and salaries, allowances and social benefits of all civil servants. In line with the State policy of cushioning low-income brackets of the society, subsidies amounted to LE 15.2 billion or 21.1% of the total, with an execution ratio of 43.0% of the estimated figure. Of this amount, 66.5% is to subsidize petroleum and the rest went to GASC. Interests on public debt (domestic and foreign) reached about LE 9.6 billion or 13.3% of the total, with an execution ratio of 22.5%.

54 Other expenditures (defense and some other miscellaneous expenses) reached LE 9.3 billion or 12.9% of the total, with an execution ratio of 50.8% of the total estimate. Social benefits, including pensions, amounted to LE 6.1 billion or 8.4% of the total, with an execution ratio of 48.8% of the estimated figure. Expenditure on the investments of the administrative system, local administration and service authorities, included in the Economic and Social Development Plan, recorded LE 5.7 billion or 8.0% of total expenditures during the period, with an execution ratio of 32.9% of the estimated figure. As a reflection of the aforementioned developments in the State budget sector (revenues and expenditures) during July/December, 2005/2006, the cash deficit amounted to LE 16.9 billion or 29.2% of the total estimated deficit for the whole FY. With the net acquisition of financial assets (reaching some LE 0.5 billion) plus the cash deficit, the overall deficit during the period reaches LE 17.4 billion or 29.2% of the total deficit estimated for the whole FY. Around 65.3% of this deficit was financed from banking sources and 2.1% from privatization proceeds. Second: Budget Sector and NIB With the addition of the fiscal operations of the NIB to the budget sector fiscal operations during July/December, 2005/2006, the cash deficit of the budget sector and the NIB declines to LE 10.2 billion. Net acquisition of financial assets also amounts to LE 1.6 billion. Accordingly, the overall deficit during the period reaches some LE 11.8 billion or 23.9% of the total estimated deficit for the whole FY. Third: Budget Sector, NIB and SIFs As a result of adding the fiscal operations of the SIFs to the aforementioned sectors, social benefits scaled up by LE 14.0 billion on the one hand, and revenues collected from property income mounted by LE 0.6 billion and some other miscellaneous revenues by LE 8.4 billion, on the other hand.

55 Accordingly, total revenues increased during July/December, 2005/2006 by LE 9.0 billion, to reach LE 65.4 billion, with an execution ratio of 42.1% of the estimated figure. Execution of Consolidated Fiscal Operations of General Government (Budget Sector, NIB and SIFs) (Total Revenues) (LE bn) Budget Sector Relative Structure Execution Ratio of Total Estimates for the Year July/December 2005/2006 Budget Sector and NIB Relative Structure Execution Ratio of Total Estimates for the Year Budget Sector, NIB and SIFs Relative Structure Execution Ratio of Total Estimates for the Year Total Revenues Tax Revenues Tax on income, profits From EGPC From SCA From CBE From other units Payable by individuals Taxes on property Taxes on goods and services Taxes on international trade (customs) Other taxes Grants Other Revenues Property income Sales of goods and services Financing investment Other Source: The Ministry of Finance Percentages are calculated in terms of LE million.

56 On the other hand, total expenditures mounted by LE 14.2 billion to LE 80.8 billion, with an execution ratio of 42.1% of the total estimated for the whole FY. Execution of Consolidated Fiscal Operations of General Government (Budget Sector, NIB and SIFs) (Total Expenditures) (LE bn) Budget Sector Relative Structure Execution Ratio of Total Estimates for the Year Budget Sector and NIB July/December 2005/2006 Execution Ratio of Relative Total Structure Estimates for the Year Budget Sector, NIB and SIFs Relative Structure Execution Ratio of Total Estimates for the Year Total Expenditures Compensations of Employees Purchases of Goods and Services Interests Subsidies, Grants and Social Benefits Subsidies Grants Social benefits Other Other Expenditures Purchases of Non-financial Assets (Investments) Source: The Ministry of Finance Percentages are calculated in terms of LE million.

57 As a result of the aforementioned fiscal operations on both sides of revenues and expenditures, the cash deficit in the consolidated fiscal operations of the general government during the period reached LE 15.4 billion or 42.0% of the estimated cash deficit for the whole FY. Net acquisition of financial assets amounted to LE 6.5 billion. Thus, the overall deficit posted LE 21.9 billion or 44.5% of the total estimated figure for the whole FY.

58 Execution of Consolidated Fiscal Operations of General Government (Budget Sector, NIB and SIFs) (Cash and Overall Deficit/Surplus and Financing Sources) Budget Sector Relative Structure Execution Ratio of Total Estimates for the Year July/December 2005/2006 Execution Ratio of Budget Relative Total Sector Structure Estimates and NIB for the Year Budget Sector, NIB and SIFs Relative Structure (LE bn) Execution Ratio of Total Estimates for the Year Total Revenues Total Expenditures Cash deficit Net acquisition of financial assets Overall Deficit Financing Sources Domestic financing Banking financing -12.1* * * Nonbanking financing Foreign borrowing Arrears Other Financing effects for eliminations Exchange rate revaluation Net privatization proceeds Privatization proceeds Treasury contribution to the Restructuring Fund Discrepancy Source: The Ministry of Finance * Includes financing of LE 11.3 billion to the budget sector and of LE 12.5 billion to the consolidated fiscal operations, from banks other than the CBE. Percentages are calculated in terms of LE million Around 57.1% of this deficit was financed by banking sources (excluding the CBE) and 1.7% by privatization proceeds.

59 - 51-3/2: Domestic Public Debt 3/2: Domestic Public Debt Domestic public debt totaled LE billion or 83.4% of GDP at end of Dec. 2005, up by LE 13.8 billion during July/Dec. of FY 2005/2006. Of the total debt, government debt accounted for 68.2%, debt of public economic authorities 9.9% and net debt of the National Investment Bank (NIB) 21.9%. Domestic Public Debt (LE bn) End of June 2005 December 2005 Change Value % Value % +(-) Total Domestic Public Debt (1+2+3) due on: Government Public Economic Authorities NIB (net debt) /2/1: Domestic Debt of the Government Domestic debt of the government amounted to LE billion, up by LE 8.4 billion or 2.4% during July-Dec. of FY 2005/2006, affected by the following developments. First, the government s net credit position with the banking system dropped by LE 20.6 billion, with its deposits therewith falling faster than its borrowings. Second, there was a rise in the government borrowing from the NIB by LE 0.7 billion. Finally, the balances of bonds and bills retreated by LE 12.9 billion.

60 Domestic Debt of the Government (LE bn) Balances at End of June 2005 Dec Change Value % Value % + (-) Domestic Debt of the Government Balances of Bonds & Bills Notes and Bonds* Of which: tradable on stock exchanges Treasury Bills Government Borrowing from the NIB Government Net Balances with the Banking System Facilities Deposits Domestic Debt of Government / GDP 65.1% 60.3% Source: Ministry of Finance, CBE and NIB - Percentages are calculated in terms of LE mn. *Including Treasury bonds, housing bonds, bonds issued in foreign currencies with commercial public banks, the 5% ratio retained from the profits of the companies subject to Law No. 97 of the year 1983 for the purchase of government bonds, and the US dollar denominated sovereign bonds tradable on world exchanges and held with financial institutions resident in Egypt (the banking system and insurance sector). It is noteworthy that the decrease in the outstanding balance of treasury bills by LE 29.0 billion, reaching LE 95.9 billion at end of December 2005 was ascribable to two main factors. First, the balance of treasury bills issued in favor of the CBE - to serve the monetary policy purposes, as agreed between the CBE and the Ministry of Finance - declined by LE 40.4 billion, due to the early redemption of LE 23.5 billion, while an amount of LE 16.9 billion of these TBs fell due. As a result, the remaining balance of these bills amounted to LE 4.6 billion at end of December Second, the outstanding balance of the TBs issued under the primary dealers system rose by LE 11.4 billion to LE 91.3 billion at end of December 2005.

61 The outstanding balance of issued treasury bonds increased by LE 16.1 billion, as an outcome of the following developments: Floating five Egyptian treasury bond issues under the primary dealers system at a value of LE 2.0 billion per issue. The first is to fall due on 12/7/2010 with an annual interest rate of 9.1%, the second on 16/8/2010 with an interest rate of 9.35%, the third on 4/10/2008 with an interest rate of 9.062%, the fourth on 18/10/2010 with an interest rate of 9.1% and finally, the fifth on 15/11/2015 and an interest rate of 9.3%. Floating two Egyptian Treasury bond issues under the primary dealers system over two stages, at a value of LE 2.0 billion for each, in August and September The auction was reopened on 8/11/2005 and 13/12/2005 on the same terms and conditions of the original issue, with the value of each issue registering LE 4.0 billion and falling due on 2/8/2009 and 20/9/2012, respectively. Increasing the dollar sovereign bonds by LE 0.2 billion. Issuing the twenty seventh tranche of the housing bonds at a value of LE 1.1 million, due on December 1 st, Also, the eighth tranche was redeemed as of December 1 st, 2005, at a value of LE 2.9 million. Redeeming three tranches of the Egyptian treasury bonds (the third, fourth and fifth) on the 16th of August, September and October The value of each tranche reached LE 0.5 billion. Hence, the balance of these bonds posted LE 43.5 billion at end of December Redeeming the treasury bonds issued in FY 1985/1986, in the amount of LE million, to repay the debts of the GASC for previous years. Reducing the value of treasury bonds issued to finance the deficit in the foreign currencies position at commercial public banks, by the equivalent of LE 0.1 billion, due to revaluation differences.

62 LEbn Government Domestic Debt June2005 Dec Borrow ing from the N.I.B. Bonds Treasury Bills Net Balance w ith the Banking System 3/2/2: Debt of Public Economic Authorities The stock of debt of public economic authorities rose by LE 4.6 billion during July-December of FY 2005/2006, to reach LE 51.8 billion at end of December This rise was a dual effect of a larger borrowing of these authorities from the NIB (by LE 1.9 billion) and their lower net credit position at the banking system (by LE 2.7 billion). Debt of Public Economic Authorities (LE bn) June 2005 December 2005 Change Balances at End of Value % Value % + (-) Total Debt Net Balances of Public Economic Authorities at the Banking System Facilities Deposits Borrowings of Public Economic Authorities from the NIB Total Debt/ GDP 8.8% 8.7% Source: Ibid

63 - 55-3/2/3 : Resources and Uses of NIB Net resources of the NIB stepped up by LE 3.4 billion during the statement period, thereby reaching LE billion at end of December This was an outcome of the retreat in the NIB s net credit position at the banking system by LE 0.7 billion and the increase of the surpluses transferred thereto from the Social Insurance Fund for Civil Servants by LE 0.4 billion, the post office saving accounts by LE 1.4 billion, and the proceeds of investment certificates and the accumulated returns on investment certificates (group A) by LE 1.4 billion. Added to this was the decline in the dollar development bonds by LE 0.4 billion and in the other domestic resources by LE 0.1 billion. Resources and Uses of NIB (LE bn) June 2005 Dec Change Balances at End of Value % Value % + (-) Resources Social Insurance Fund for Civil Servants Social Insurance Fund for Business Sector Employees (Public and Private ) Investment certificates proceeds Accumulated returns on investment certificates (group A) US dollar development bonds Post office saving accounts NIB's account balances at the banking system (net) Other Resources Uses Government Public economic authorities Others NIB debt (net) / GDP 21.3% 19.4% Source: Ibid

64 The NIB used about LE billion or 45.2% of its available resources to finance government investments and LE 60.2 billion or 18.8% to finance the investments of public economic authorities. The other resources (LE billion or 36.0%) were directed to finance different activities of the Bank, such as concessional lending and participation in different projects.

65 External Transactions 4/1: Foreign Exchange Market Transactions on the foreign exchange market during July-December of FY 2005/2006 remarkably rebounded, in comparison to the same period a year earlier. Resources increased by US$ 7.4 billion or 103.4%, posting US$ 14.7 billion. On the other hand, utilizations also augmented by approximately US$ 3.8 billion or 48.0%, reaching US$ 11.8 billion. This brought about a surplus of US$ 2.9 billion during the reporting period (against a deficit of US$ 0.7 billion in the period of comparison), stemming from the surplus of US$ 2.8 billion in the banking system transactions and of US$ 0.1 billion of exchange dealer companies. Resources and Utilizations of the Forex Market (US$ mn) During the Period July-December 2004/ /2006 Surplus/Deficit (-) Banking System Foreign Exchange Dealer Companies Resources Banking System Foreign Exchange Dealer Companies Utilizations Banking System Foreign Exchange Dealer Companies Net assets in foreign currencies with banks apart from the CBE- decreased by US$ 0.3 billion, reaching US$ 4 billion at end of December Concurrently, the ratio of banks' assets to their obligations in foreign currencies fell to 112.3% at end of December 2005 (from 113.8% at end of June 2005).

66 The positive developments in the forex market led to a rise in the CBE's net international reserves (NIR), by US$ 2.6 billion, to reach US$ 21.9 billion at end of December NIR remained on the rise (at the time of printing this Review), standing at US$ 22.8 billion at end of April As for the developments in the exchange rate, the value of the US dollar (buy) decreased to PT at end of December 2005 (against PT at end of June 2005), denoting a drop of 0.8% throughout July/December, 2005/2006. Average General Rate of the US Dollar on the Forex Market* (PT/Dollar) End of Month Average Rate December January February March April May June July August September October November December Source: The FOREX Statistics Chamber at the CBE The number of exchange dealer companies currently in business in the foreign exchange market registered 101, with 154 branches at end of December The surplus of US$ million realized in the corresponding period of the previous FY slackened to US$ 76 million in the reporting period. The decreased surplus was an outcome of the increase in their utilizations by US$ 743 million, to reach US$ 1.1 billion (9.6% of total market utilizations) and the increase in their resources by only US$ 680 million, to reach US$ 1.2 billion (8.2% of total market resources) during the first half of the FY 2005/2006.

67 - 59-4/2: Balance of Payments 4/2/1 : Summary Egypt s BOP revealed an overall surplus of US$ 2.6 billion during the first half of FY 2005/2006 (against US$ 0.7 billion during the same period a year earlier), with the country s foreign reserve assets rising by the same amount. The BOP surplus was generally an outcome of the shift of the capital and financial account from a net outflow of US$ 0.4 billion to a net inflow of US$ 2.8 billion; and the current account surplus of US$ 1.1 billion (against US$ 1.8 billion). The retreat in the current account surplus was ascribed to the widening of the trade deficit, as the growth rate of merchandise import payments outpaced that of merchandise exports. This is in addition to the 5.7% drop in the services surplus, to reach only US$ 4.2 billion, and the 13.2% rise in net unrequited transfers, to register US$ 2.7 billion. As for the capital and financial account, the increase in its net inflows during the period was ascribed to larger flows of foreign investment (direct and portfolio). Foreign investment unfolded a net inflow of US$ 6.1 billion against US$ 2.0 billion. This was partly a result of a rise in the FDI in Egypt to record a net inflow of US$ 3.3 billion or 3.2% of GDP (including US$ 0.9 billion as net investments in the oil sector and US$ 0.5 billion as the proceeds of selling local enterprises to foreign investors) against inflows of US$ 1.8 billion or 2.1% of GDP (including US$ 1.4 billion as investments in the oil sector and US$ 28.0 million as the proceeds of selling local companies to foreigners). Portfolio investment, in its turn, improved to a net inflow of US$ million (including foreigners subscriptions of US$ million for Egyptian bonds and notes) against a net inflow of US$ million. The capital and financial account was also affected by the net outflows of US$ 3.6 billion achieved by the other assets and liabilities (against US$ 3.3 billion).moreover, medium- and long-term borrowing revealed net repayments of US$ million (against US$ million). A statistical statement recording economic transactions between a given economy (resident) and the rest of the world (non-resident) during a specific period, compiled in accordance with the Fifth Edition of the IMF s Balance of Payments Manual, September 1993

68 As for the current account, current payments rose by US$ 4.3 billion to US$ 18.9 billion, owing to a rise in import payments by 26.3% and service payments by 40.4%. On the other hand, current receipts mounted by US$ 3.6 billion, to reach US$ 20.1 billion. This was a reflection of a 35.4% pickup in merchandise export proceeds, 13.5% in service receipts and 35.1% in private transfers. Meanwhile, official transfers fell steeply by 51.1%. Summary of Current Receipts and Payments (US$ mn) July / December 2004/2005 % 2005/2006 % Change (-) Current Receipts Export proceeds* Service receipts Private transfers (net) Official transfers (net) (314.8) Current payments Import payments** Service payments *Calculated on FOB basis, as their value is calculated at the customs borders of the Egyptian economy, i.e., excluding the costs of shipment, insurance and freight. They include exports of free zones to the rest of the world. **Calculated on CIF basis, i.e., including the costs of shipment, insurance and freight. They include imports of free zones from the rest of the world. Some of the external balance indicators showed a decrease as illustrated in the following table: Current receipts/payments Coverage Ratio (%) July / December 2004/ /2006 Merchandise Exports/ Merchandise Imports Invisible Receipts/Invisible Payments Current Receipts (excluding official transfers)/current Payments Current Receipts/Current Payments

69 Balance of Payments (US$ mn) July/December 2004/ /2006* Current Account Current Account (excluding transfers ) Trade Balance Exports ** Oil and its products Other exports Imports ** Oil imports Other imports Services Balance Receipts, of which : Transport, of which Suez Canal tolls (1601.9) (1762.5) Travel Investment income Payments, of which: Transport Investment income Transfers Private (net) Official (net) Capital and financial Account Capital account Financial account Direct Investment in Egypt (net)*** Direct Investment Abroad Portfolio Investment in Egypt (net) Portfolio Investment Abroad Other Investments (net) Net Errors and Omissions Overall Balance Change in Reserve Assets, Increase (-) * Provisional figures ** Including exports and imports of free zones *** Including the FDI in the oil sector and the proceeds of selling local enterprises to foreign investors by 10% or more of the capital of the enterprise + Including foreigners subscriptions for Egyptian bonds and notes ++ The increase in balances takes a negative sign, as it represents an outflow on the debit side, and vice versa.

70 - 62-4/2/2: Trade Balance During July/December of the FY 2005/2006, the value of external trade (the sum of exports and imports) remarkably grew by 29.5% over the corresponding period of the previous FY. This was ascribed to the measures taken by the government to stimulate the economic activity, especially customs and tax measures, in addition to the increase in world oil prices. The index of economic openness external trade as a percentage of GDP - increased from 20.6% in the period of comparison to 22.4% during the period under review. The remarkable growth in the Egyptian export earnings (35.4%, to register US$ 8.6 billion) was accompanied by an increase in import payments by 26.3%, to reach US$ 14.4 billion. Export proceeds posted a noticeable rise because oil exports grew dramatically by 87.6% to US$ 4.7 billion or 55.2% of total export proceeds during the period under review. Non-oil exports remained almost unchanged at their previous level (US$ 3.9 billion). Exports as a percentage of GDP improved to reach 8.3% during the period under review (against 7.3% during the corresponding period of the pervious FY). Import payments moved up by US$ 3.0 billion, as a result of an increase in payments for imports of all commodity groups. However, the group of fuel, mineral oils and products was an exception, as it decreased by 11.7%. The rise in import payments was a reflection of strong domestic demand, on the one hand, and higher world prices of some goods, on the other. The fall in the LE exchange rate against the US$ helped push up the country s demand for imports. Of the total imports, intermediate and investment goods accounted for 53.9%; a matter that may help increase production and accordingly enhance the economic growth in the future. The ratio of the import payments to GDP also increased to 14.0% (against 13.2%).

71 Against this background, the trade deficit expanded by 15.1%, to stand at US$ 5.8 billion (5.7% of GDP). Meanwhile, merchandise export proceeds/merchandise import payments stepped up to 59.4% against 55.4%. US$ bn CommodityTransactions 6.3 July/ December / / Exports Imports 4/2/2/1: Commodity Distribution of Exports and Imports A- Exports by Degree of Processing The distribution of merchandise exports showed an increase in the proceeds of all commodity groups during July/December, 2005/2006, in comparison with the same period of the previous FY. As such, the groups of fuel, mineral oils and products; raw materials; and semi-finished goods grew by 85.0%, 24.2% and 23.3%, respectively. On the other hand, finished goods underwent a slight decrease of 3.2%.

72 Commodity Distribution of Exports by Degree of Processing (US$ mn) July/December 2004/ /2006 Change Value % Value % Total Fuel, mineral oils and products Raw materials Semi-finished goods Finished goods (81.1) 5- Miscellaneous products, unclassified (53.4) Oil export proceeds surged by 87.6%, as a result of the following developments: exports of liquefied natural gas sharply rose to reach US$ 1.1 billion (against US$ 38.0 million during the period of comparison), representing 50.3% of the increase in oil exports. Such a rise followed the full operation of the two production stages of the natural gas liquefaction project in Edco (exported to USA, Spain, France, South Korea and Belgium). Moreover, export proceeds of crude oil went up by 59.4%, to reach US$ 1.6 billion, owing to an increase of 15.3% in exported quantities and a pickup in export prices from US$ 30.6 to US$ 42.4 a barrel. Exports of oil products stepped up by 44.9%, to reach US$ 1.5 billion as an outcome of the increase in exported quantities by 12.3% and in the average export prices (from US$ to US$ per ton). Bunker and jet fuel scaled up by 7.6%, to reach US$ million. Non-oil export proceeds slightly rose by 0.8%, to record US$ 3.9 billion. The increase in export proceeds was mainly in aluminum, (unmixed); cast iron and products thereof; glass and articles thereof; organic and inorganic chemicals; and paper and its products. On the other hand, a decline was noticed in exports of iron and steel products; aluminum products; cement; cars, tractors and bicycles; animal and vegetable fats, greases & oils and products.

73 Sectoral Distribution of Exports July/December 2005/ % 11.2% 47.1% Public Sector Private Sector Investment Sector According to the sectoral distribution of total export proceeds, the public sector came first with 47.1% of the total (oil exports represented 96.3% of its total exports). The private sector came second with 41.7% of the total (finished goods represented 65.5%) then the investment sector came next with 11.2% (oil exports constituted 88.0% of its total exports). Given the limited growth rate of non-oil exports, as seen in the above said trends, all sectors -especially the public and investment sectors- should play a more effective role in stimulating the exports of such type of goods. Main Non-oil Exports In Terms of Value July/December 2005/2006 Electric machines & Appliances Ready-made clothes Articles of iron and steel US$ m n

74 B- Imports by Degree of Use Merchandise import payments rose by US$ 3.0 billion, or 26.3%, to reach US$ 14.4 billion, as a result of an increase in import payments of all commodity groups. The groups of raw materials, intermediate goods, investment goods and consumer goods grew by 33.5%, 31.6%, 31.5% and 16.7%, in order. In contrast, the group of fuel, mineral oils and products decreased by 11.7%. Commodity Distribution of Imports by Degree of Use (US$ mn) July-December 2004/ /2006 Change Value % Value % Total Fuel, mineral oils and products (142.1) 2- Raw materials Intermediate goods Investment goods Consumer goods a- durables b- non-durables Miscellaneous products, unclassified Non-oil imports amounted to US$ 11.9 billion, with a growth rate of 20.7%. The increase was mainly seen in iron and steel products; car accessories and spare parts; fertilizers; cars for transporting passengers; pharmaceuticals; electric appliances for telephones and telegraphs; and cement. On the other hand, a decline was noticed in the imports of wheat (43.2%), household electric machines; synthetic fibers; greases, fats, animal and vegetable oils and products; oleaginous fruits and seeds; aluminum and its products; and locomotives, carriages and railway and trams related equipment and their parts.

75 Oil imports reached US$ 2.5 billion, posting a significant growth of 61.2% and representing 17.7% of total import payments. The said growth was chiefly ascribed to the sharp increase in crude oil imports that resulted from world oil price hikes and the higher domestic consumption during the period under review. Meanwhile, imports of oil products rolled back by 10.6%. Sectoral Distribution of Imports July/December 2005/ % 0.3% 35.9% Public Sector Private Sector Investment Sector and steel products; china ware; and pharmaceuticals). Concerning the sectoral distribution of total import payments, the private sector ranked first (its main imports were crude oil and products, iron and steel products and wheat). Second came the public sector (its chief imports were crude oil and products; greases, fats, animal and vegetable oils and products; and agriculture machines), then the investment sector (its main imports were plastics and articles thereof; iron Main Non-oil Imports In Terms of Value July/December 2005/2006 Cars accessories and spare parts Pharmaceuticals Plastic & articles thereof Organic & inorganic chemicals Wheat Iron & steel products US $ mn

76 - 68-4/2/2/2: Geographical Distribution of Export Proceeds and Import Payments During July/December, 2005/2006, the EU countries continued to rank first among Egyptian export markets, with exports thereto reaching US$ 3.2 billion or 37.5% of total export proceeds. On top of this group was Italy, followed by Spain, the Netherlands, France, the UK and Germany (these countries accounted for 90.4% of total exports to the EU). The USA came second, receiving exports of US$ 2.7 billion, or 31.3% of the total. Arab countries followed, with exports thereto amounting to US$ 1.0 billion or 11.9% of the total. In the forefront of the group came UAE, followed by Saudi Arabia, then Jordan, Libya and Tunisia (these countries represented 61.2% of total exports to the Arab countries). Asian countries had a share of US$ million or 9.9% of the total, with India coming first, followed by Singapore, Hong Kong and South Korea (these countries accounted for 79.3%). Geographical Distribution of Exports July/December 2005/2006 African Countries 1.3% Asian Countries 9.9% Arab Countries 11.9% U.S.A. 31.3% Other European countries 5.5% Federal Russia & C.I.S. 0.3% Other countries 2.3% EU 37.5%