CENTRAL BANK OF EGYPT

Transcription

1 CENTRAL BANK OF EGYPT ECONOMIC REVIEW Vol. 58 No /2018 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.. 5 1/3 Inflation /4 Tourism 9 2- Monetary and Banking Developments 2/1 Monetary and Banking Policy and Monetary Aggregates 12 2/1/1 Monetary Policy /1/2 Reserve Money (M 0 ). 15 2/1/3 Domestic Liquidity (M 2 ) and Counterpart Assets 17 2/1/4 Payment Systems and Information Technology (IT). 20 2/1/5 Transactions Conducted via SWIFT. 22 2/2 Banking and Credit Developments /2/1 Supervision Sector /2/2 Overview of Aggregate Financial Position of Banks 27 2/2/3 Interbank Transactions /2/4 Deposits. 29 2/2/5 Lending Activity Non-Banking Financial Sector 3/1 Stock Market Public Finance 4/1 The Budget Sector (Administrative System, Local Administration and Service Authorities). 37 4/2 The General Government 44 4/3 Domestic Public Debt /3/1 Net Debt of the Government. 46 4/3/2 Net Debt of Public Economic Authorities 48 4/3/3 Net Debt of NIB 48 4/3/4 Intra-Debt.. 49

4 5- External Transactions 5/1 Foreign Exchange Market and NIRs /2 Balance of Payments /2/1 Current Account. 52 5/2/1/1 Trade Balance. 53 5/2/1/2 Balance of Services & Investment Income and Net Unrequited Current Transfers 54 5/2/2 Capital and Financial Account 57 5/3 Foreign Trade /3/1 Merchandise Distribution of Exports by Degree of Processing /3/2 Sectoral Distribution of Exports by Degree of Processing 61 5/3/3 Merchandise Distribution of Imports by Degree of Use. 62 5/3/4 Sectoral Distribution of Imports by Degree of Use 64 5/3/5 Foreign Trade by Geographical Distribution /3/6 Foreign Trade by Main Commodity and Merchandise Balances /4 International Finance /4/1 Foreign Direct Investment (FDI) in Egypt /4/2 Portfolio Investment in Egypt. 72 5/4/3 External Official Grants 72 5/4/4 External Debt 74 Annex Statistical Section

5 Main Macroeconomic Indicators GDP (LE bn) July/March 2016/ /2018 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 (%) Rate of Change in Consumer Price Index (urban) (January 2010=100) Rate of Change in Producer Price Index (January 2016=100) Monetary and Credit Developments July/March 2016/ / July/March 2016/ /2018 End of Period Growth rate of domestic liquidity M2 (%) Growth rate of domestic liquidity M2 (%) (excluding the effect of change in exchange rate + ) Growth rate of time and saving deposits in local currency (%) The effect of the decision of liberalizing the exchange rate on 3 November 2016.

6 Growth rate of deposits in foreign currencies (%) Growth rate of deposits in foreign currencies (%) (excluding the effect of change in exchange rate + ) Foreign currency deposits/total deposits (dollarization rate) (%) Foreign currency deposits/total deposits (dollarization rate) (%) (excluding the effect of change in exchange rate + ) Net claims on the government/total credit (%) Credit to the private business sector/total credit (%) Credit to the household sector/total credit (%) Credit to the public business sector/total credit (%) Change in net claims on the government/change in total credit (%) Change in credit to the private business sector/ 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/March 2016/ /2018 End of Period CBE Discount Rate Interest Rates on Main Operations at the CBE * Deposit Acceptance Operations at the CBE (7-days) at a fixed interest rate ** 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 The effect of the decision of liberalizing the exchange rate on 3 November * 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. These operations are conducted on Tuesday of every week for a 7-day maturity, except for the days falling on official holidays. ** It was decided to start accepting longer-term deposits with variable interest rate to absorb the excess liquidity at banks, since the decision of liberalizing the exchange rate on November 3, 2016.

7 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) Fiscal Operations of the Budget Sector July/March 2016/ /2018 Actual (LE bn) -Total Revenues Total Expenditures Cash Surplus (+) / Deficit (-) Overall Surplus (+) / Deficit (-) * Primary Surplus (+)/ Deficit (-) Total Finance Domestic Finance Banking Non-Banking External Borrowing Others Difference between TBs Face and Present Value Discrepancy Cash Surplus(+) (Deficit) (-)/ GDP (%) Overall Surplus (+) (Deficit)(-)/ GDP (%) Primary Surplus (+) (Deficit) (-)/ GDP (%) Revenues/GDP (%) Expenditures/GDP (%) Domestic Public Debt End of June 2017 March 2018 (LE bn) Gross, due on: Government (net) Public Economic Authorities (net) NIB, Minus Intra-Debt (net) * Including the net acquisition of financial assets.

8 Balance of Payments July/March 2016/ /2018 (US$ bn) Current Account and Transfers (12.5) (5.3) Trade Balance (28.4) (28.0) 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 (3.3) (4.7) Receipts Payments Current Transfers Official (%) Private (%) Capital and Financial Account Overall Surplus/(Deficit) End of External Debt June 2017 March 2018 (US$ bn) Gross External Debt Long-& Medium-term Debt Short-term Debt External Debt/GDP (%)

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 increased to 5.2 percent during July/March of FY 2017/2018 against 3.2 percent during the same period a year earlier. Moreover, real GDP growth at market prices hiked to 5.3 percent from 3.9 percent. Real GDP* Value (in LE bn) July/March Rate of Change (%) July/March 2016/ / / /2018 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 2016/2017. % Real GDP Grow th Rates (At Factor Cost) / / / / /2017 July/Sept. Oct./Dec. Jan./March April/June July/Sept. Oct./Dec. Jan./March April/June July/Sept. Oct./Dec. Jan./March April/June July/Sept. Oct./Dec. Jan./March 2014/ / / / It is worth mentioning that the Ministry of Planning, Monitoring and Administrative Reform has changed the base year to 2016/2017 instead of 2011/2012, starting from the data of Q1 of FY 2017/2018.

10 -2- GDP (at factor cost and 2016/2017 prices) On the supply side, the increase in real GDP growth at factor cost to 5.2 percent during the reporting period reflected the contributions of manufacturing (0.8 percentage point), extractions (0.8 point), tourism (0.7 point), construction and building (0.5 point), wholesale and retail trade (0.5 point) and agriculture (0.4 point). In the meantime, the contributions of other sectors combined posted 1.5 point. The remarkable improvement in the growth rate relative to the period of comparison was backed by the higher performance of some sectors that drive economic growth, especially tourism which increased by 36.0 percent (versus negative 6.7 percent), the Suez Canal by 10.0 percent (versus negative 1.3 percent), and extractions by 8.7 percent (versus negative 1.0 percent) % Real GDP Growth Rates During July/March (Annual Basis) / / Agriculture, Forests & Fishing Extractions Manufacturing Electricity Water, Sanitation & Recycling Construction & Building Transportation & Storage Communications Information Suez Canal Wholesale & Retail Trade Financial Intermediaries & Auxiliary Services Social Insurance & Insurance Tourism Real Estate General Government Social Services As regards the private and public sectors contributions to real GDP growth, the private sector accounted for 71.0 percent, adding 3.7 points, while the public sector contributed 1.5 point. The contribution of the private sector (3.7 points) during July/March of FY 2017/2018 was due to the contributions of tourism (0.7 point); manufacturing (0.6 point); wholesale & retail trade and construction & building (0.5 point each); and agriculture, forests & fishing and real estate (0.4 point each). In addition, the contributions of other sectors combined reached 0.6 point.

11 -3- On the other hand, the contribution of the public sector to GDP growth was confined to 1.5 percentage point. This was a combined result of the contributions of extractions (0.7 point), manufacturing and the Suez Canal (0.2 point each), the general government (0.1 point), and other sectors combined (0.3 point). GDP by Expenditure (at 2016/2017 market prices) On the demand side, real GDP growth at market prices (5.3 percent during the reporting period) was traced to the contribution of domestic demand (consumption and investment) that reached 3.5 points. Add to this the contribution of net external demand (exports of goods and services less imports of goods and services denominated in LE) that reached 1.8 point, reflecting the significant rise in exports by 45.9 percent, that largely outpaced the rise in imports (16.9 percent). The share of domestic demand (3.5 points) was an outcome of the contribution of both final consumption (government and private), reaching 1.4 points, and capital formation (2.1 points). Also, total investments (at constant prices) mounted by 15.3 percent to LE billion, versus LE billion in the corresponding period a year earlier. Rates of Change and Share of Demand Components in Real GDP Growth at Market Prices Rates of Change + (-) During July/March Contributions to Growth Rate During July/March 2016/ / /2018 (%) (Percentage Point) Real GDP Growth Domestic Demand A- Final Consumption Private Public B- Capital Formation (Including Change in Stock) Net External Demand 20.6 (13.5) 1.8 A- Exports of Goods and Services B- Imports of Goods and Services Source: Rates of change are illustrated in Table (1/2) of the Statistical Annex. Contributions of demand components are calculated by researchers. Contributions of individual sectors may not sum to total growth due to rounding.

12 -4- Investments (at current prices) rose by 40.3 percent to LE billion in July/March of FY 2017/2018 against LE billion in the corresponding period a year earlier. These investments were distributed as follows: the productive services sectors 2 accounted for 19.4 percent of total current investments, followed by the real estate sector (12.7 percent), extractions (11.8 percent), social services 3 (11.0 percent), manufacturing (8.7 percent), electricity (7.9 percent), and finally agriculture (3.8 percent). In addition, other central investments reached 21.8 percent of the total. The private sector implemented 50.6 percent of total current investments, mostly in the sectors of extractions, productive services, real estate, and manufacturing. Meanwhile, the public sector executed 49.4 percent of total investments, mainly in central investments, productive services, electricity and social services. GDP and Sectoral Analysis of Output Gap 4 As a consequence of the above-mentioned developments in supply and demand, the output gap registered 0.7 percent in Q3 (January/March) of FY 2017/2018, against 0.4 percent in the corresponding quarter a year earlier. The widening of the positive output gap in the said quarter compared with the corresponding one reflects the increase in actual GDP growth to 5.3 percent compared with the potential GDP growth of 4.6 percent. % 6 Growth Rate of Real GDP (Seasonally Adjusted), Disaggregated into Potential GDP and GDP Gap (Annual Basis) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/ / / / / /18 GDP Gap (Business Cycle) Actual GDP Growth Rate Potential GDP (Trend) 2 Productive services sectors include transportation and storage, communications, information, Suez Canal, wholesale and retail trade, financial intermediation and subsidiary activities, and tourism. 3 Social services include education, health, sanitation and other services. 4 The trend component (which represents the potential or GDP growth trend) was calculated by applying the approach of Hodrick-Prescott Filter. Then, the cyclical component, which reflects the output gap (the difference between actual and potential GDP growth rates) was derived by using the quarterly data of real GDP at constant prices (for FY 2016/2017) during the period from Q1 2006/07 to Q3 2017/18 (seasonally adjusted by using the Multiplicative Moving Average approach).

13 -5- The main sectors that contributed to the increase in the positive output gap during Q3 of FY 2017/2018 were: the Suez Canal (4.2 percentage points against negative 4.0 points) and extractions (5.9 points against 0.7 point). In addition, the negative gap improved in some other sectors, such as the general government (negative 1.0 point against negative 2.4 points), real estate (negative 0.3 point versus negative 1.0 point), and social services (negative 0.1 point versus negative 0.8 point) Concurrently, the output gap narrowed in some other sectors such as tourism that recorded negative 8.8 points versus 45.6 points, communications (negative 1.9 point against 4.6 points), and electricity (negative 1.2 point against negative 0.9 point). 1/2- Labor Force, Employment and Unemployment According to CAPMAS quarterly Labor Force Sample Survey (LFS) for Q3 (January/March 2017/2018), the size of the labor force increased by 37.0 thousand persons or 0.1 percent, compared with the same quarter of FY 2016/2017, to reach 29.2 million persons. Similarly, the number of employed persons rose by thousand persons or 1.7 percent compared with the corresponding quarter to reach 26.1 million persons. The sector of agriculture and fishing continued to acquire the lion s share of employed persons (20.5 percent); followed by wholesale and retail trade (14.1 percent); manufacturing (12.9 percent); construction and building (12.6 percent); and transportation & storage (7.5 percent). Against this background, the number of unemployed persons fell by 409 thousand during this period to 3.1 million. Thus, unemployment decreased to 10.6 percent of the total labor force (from 12.0 percent in the corresponding quarter), recording as such its lowest level in the last five years. % Unemployment Rate During January/March

14 -6- It is worthy to mention that jobless males decreased to 7.3 percent in Q3 of 2017/2018 against 8.2 percent in the corresponding quarter. Similarly, jobless females fell to 22.0 percent from 24.7 percent in the same period a year earlier. Unemployment in the urban sections recorded 12.1 percent and in rural areas 9.5 percent. Unemployment among youth (15-29 years old) accounted for 75.2 percent of total jobless persons, and 87.7 percent of total jobless persons were holders of intermediate, above intermediate, university and post graduate degrees. 1/3 Inflation A- Consumer Price Index (Urban) According to the CAPMAS statistics, headline CPI inflation (urban) increased by 8.7 percent in July/March of FY 2017/2018 (against 24.5 percent in the same period a year earlier). This was largely ascribed to the decrease in the contribution of food and beverages (3.0 percentage points against 15.8 points); restaurants and hotels (0.5 point against 1.2 point); furnishings, household equipment and routine maintenance (0.3 point against 0.9 point); transportation (0.6 point against 1.1 point). Declines were also observed in the shares of alcoholic beverages and tobacco, miscellaneous goods and services, healthcare, clothing and footwear, and culture and recreation that recorded 2.2 points combined versus 3.8 points. However, such decline was offset by the rise in the shares of education (0.9 point versus 0.7 point), housing, water, electricity, gas and fuel (1.1 point versus 1.0 point), and wire and wireless communications (0.1 point versus nil). (%) Rates of Change in Headline & Food and Beverages CPI (Urban) During the Period July/March / / / All Items Food and Beverages

15 -7- The noticeable decrease in the contribution of food and beverages (3.0 points against 15.8 points) was attributed to the lower contributions of all subgroups, topped by meat and poultry (0.1 point versus 3.9 points), vegetables (1.1 point versus 3.3 points), milk, cheese and eggs (0.8 point versus 2.2 points), and oil and fats (0.2 point versus 1.4 point). Percentage Point 5.0 Contributions of Main Items of Food and Beverages to Annual Headline Inflation During July/March Bread & Cereals Meat & Poultry Fish & Seafood Milk, Cheese & Eggs Vegetables Non-Alcoholic Beverages 2016/ /2018 CPI Rates of Change and Shares of Main CPI Groups in Headline Inflation in the Periods of Review and Comparison (January 2010 = 100) Shares in Headline Inflation (Percentage Point) in July/March Main CPI Groups Relative Weight Headline Inflation (%) in July/March 2016/ / / /2018 General Index Food and beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas, and fuel Furnishings, household equipment and routine maintenance Healthcare Transportation Wire and wireless communications Culture and recreation Education Restaurants and hotels Miscellaneous goods and services Source: For inflation rates: Table (1/3) in the Statistical Annex. For the contributions of CPI groups: Economic Research Sector.

16 -8- The headline CPI inflation (m/m) declined to 0.9 percent on average during July/March 2017/2018 (from 2.5 percent in the period of comparison). It peaked during the reporting period in July 2017 (3.2 percent). (%) 5 Monthly Rate of Change in CPI (Urban) July 2016 August September October November December January February March 2017 April May June July 2017 August September October November December January February March 2018 B- Producer Price Index (PPI) The headline PPI inflation rose during July/March 2017/2018 to 23.0 percent (from 22.4 percent in the same period a year earlier). This rise was traced to the larger contributions of mining and quarrying (10.4 percentage points against 3.3 points); and water supply, sanitation, and waste treatment and management (0.3 point against nil). Meanwhile, the contributions of manufacturing decreased to 8.3 points (from 13.0 points); food and accommodation services to 0.1 point (from 1.4 point); agriculture and fishing to 3.4 points (from 4.0 points); transportation and storage to nil (from 0.1 point), and electricity, gas, steam, and air conditioning supplies to 0.5 point (from 0.6 point).

17 -9- PPI Rates of Change and Shares of Main PPI Groups in Headline Inflation During the Periods of Review and Comparison (January 2016 = 100) Share in Headline Inflation (Percentage Point) in July/March Main PPI Groups Relative Rates of Change (%) Weight in July/March 2016/ / / /2018 General Index Agriculture and fishing Mining and quarrying Manufacturing Electricity, gas, steam, and air conditioning supplies Water supply, sanitation, and waste treatment and management Transportation and storage Food and accommodation services Information and Communications Source: For rates of change: Table (1/4) in the Statistical Annex. For the contributions of PPI groups: Economic Research Sector. 1/4 Tourism According to the statistics of the Central Agency for Public Mobilization and Statistics (CAPMAS), tourism indicators improved in July/March 2017/2018 compared with the same period a year earlier. In figures, the number of arrivals rose by 48.2 percent to 7.1 million tourists (compared with 4.8 million in the corresponding period). Also, the number of tourist nights by departure surged by percent to 75.8 million nights (against 33.4 million nights). Million Nights Numbers of Tourists and Tourist Nights During July/March 2015/ / /2018 Number of Tourists Number of Tourist Nights Million Tourists

18 -10- In parallel, the average length of stay increased to 11.0 nights (from 7.1 nights), and the average spending per tourist a night rose to US$ 95.6 (from US$ 84.9 in the corresponding period). These developments were positively reflected in tourism revenues, bringing them up to US$ 7.3 billion (representing 13.2 percent of total current receipts) in the period under review, against US$ 2.8 billion (representing 6.7 percent) in the corresponding period. Tourism Revenues During July/March Tourism Revenues/Total Current Receipts (%) / / / Tourism Revenues (US$ bn) Tourism Revenues (US$ bn) Tourism Revenues/Total Current Receipts (%) On the other hand, investments in the tourism sector rose by 37.8 percent to LE 4.0 billion in July/March 2017/2018, compared to LE 2.9 billion in the same period a year earlier. Tourism Indicators (July/March) Rate of 2016/ /2018 Change + (-) (%) Number of arrivals (000s) Number of tourist nights by departure (000s) Tourism revenues (US$ mn) Tourism revenues/gdp (%) Tourism revenues/total current receipts (%) Investments in tourism sector/ Total investments (%) The average spending per tourist a night (US$) Average length of stay (night) Source: CAPMAS, the Ministry of Planning, Monitoring and Administrative Reform, and the Ministry of Tourism.

19 -11- Geographical Distribution of Tourist Flows 1-Number of Arrivals The number of arrivals noticeably increased by 48.2 percent during July/March 2017/2018, compared with the same period a year earlier, to 7.1 million tourists due to the rise in the number of tourists from all the geographical groups. About 89.3 percent of the total increase was in arrivals from European countries and the Middle East as arrivals from European countries moved up to 4.2 million (representing 59.0 percent of total arrivals) and from the Middle East to 1.6 million (22.7 percent of the total). No. (000s) Number of Arrivals (July/March) 2016/ /2018 Relative Weight No. (000s) Relative Weight Change + (-) No. (000s) Rate of Change (%) Total Europe Middle East Africa The Americas Asia and the Pacific Others Source: CAPMAS 2- Tourist Nights by Departure The number of tourist nights by departure remarkably surged during July/March 2017/2018 reaching 75.8 million nights, up by percent as compared with the corresponding period of the previous FY. Around 77.7 percent of the total increase was in the number of tourist nights by departures from both European countries (registering 38.8 million nights or 51.1 percent of total tourist nights) and the Middle East (21.3 million nights or 28.1 percent of total tourist nights). Number of Tourist Nights by Departure No. (000s) (July/March) 2016/ /2018 Relative Weight No. (000s) Relative Weight Change + (-) No. (000s) Rate of Change (%) Total Europe Middle East Africa The Americas Asia and the Pacific Others Source: Ibid

20 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. Below are the monetary policy decisions taken in July/March 2017/2018: The MPC's decisions in its periodic meetings (seven meetings) during July/March 2017/2018 were consistent with inflation developments and the MPC's inflationary pressure forecasts. The Committee judged in its first meeting held on July 6, 2017 that the tightening monetary policy adopted by the CBE is still required to mitigate the inflationary effects resulting from implementing the economic reform program in collaboration with the IMF. Accordingly, the Committee decided to raise the overnight deposit and lending rates by 200 bps to percent and percent, respectively. Also, the rate of the CBE's main operation and the discount rate were raised by 200 bps to percent each. Moreover, the Committee decided in its four meetings held on 17 August, 28 September, 16 November, and 28 December 2017 to keep the overnight deposit and lending rates, the CBE's main operations rate and the CBE's discount rate unchanged. Thus, the effects of the tightening monetary policy, adopted proactively and temporarily by the CBE to contain the inflationary pressures faced by the Egyptian economy, were reflected in the inflation data. As the MPC observed the positive impacts of its monetary policy and decisions under the economic reform program, the monthly inflation posted low rates despite the impact of the higher regulated prices of some goods and services. Therefore, it decided in its sixth meeting held on February 15, 2018 to cut the overnight deposit and lending rates and the CBE's main operation rate by 100 bps each to reach percent, percent, and percent, respectively. Similarly, the discount rate was cut by 100 bps to stand at percent. In its seventh meeting held on March 29, 2018, the MPC decided to continue easing its tight stance on interest rates, which it temporarily began in its meeting on February 15, Thus, it decided to cut the overnight deposit rate, overnight lending rate, and the rate of the CBE's main operation by 100 bps each to percent, percent, and percent, respectively. The discount

21 -13- rate was also cut by 100 bps to percent. Despite the several risks surrounding the inflation outlook, notably the demand side inflationary pressures, the Committee judged that the current interest rates were consistent with achieving the inflation target of 13 percent (+/- 3 percent) in Q Moreover, the data reflected the ongoing recovery of economic activity whether through the continuous surge in real GDP growth or the decline in unemployment rate as aforementioned. During the preparation of this Review, the MPC decided in its two meetings held on May 17 and June 28, 2018 to keep the overnight deposit and lending rates, the CBE's main operation rate, and the discount rate unchanged. The following are the key developments that took place during the period under review: First: Interest Rates: 1- Overnight Interbank Interest Rates In light of the MPC's decisions taken during July/March 2017/2018 regarding the interest rates (whether raising them by 200 bps, keeping them unchanged or cutting them) and the continued policy by the CBE to absorb excess liquidity via longer term deposit acceptance operations, the overnight interbank interest rates trended upwards and moved close to the corridor ceiling rate at the beginning of the period. However, they trended downwards and moved close to the corridor floor rate as of mid-august and during the period under review. This is illustrated in the following chart: % O/N Interbank Rate and Policy Rate for the Period from January 2015 to March Overnight Interbank Rate Overnight Deposit Rate Overnight Lending Rate

22 Interest Rates on LE Deposits and Loans The MPC's decisions taken in July/March 2017/2018 affected the interest rates in the money market. Deposits of more than one month and up to three months accounted for the bulk of the increase (1.8 percent) between the ends of June 2017 and March 2018 as shown in the following table: Weighted Average Interest Rate Month June 2017 (%) March 2018 (%) 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/March 2017/2018, the average liquidity absorbed by the CBE via its monetary policy instruments markedly increased to LE 651 billion at end of March 2018 (against LE 455 billion at end of June 2017), up by LE 196 billion. The rise in average open market operations was ascribed to the pickup in both net government spending on various activities and net foreign exchange purchases, which resulted in a gradual increase in NIRs at the CBE following the economic reform measures. The NIRs rose to US$ 38.2 billion at end of Jan. 2018, US$ 42.5 billion at end of Feb. 2018, and US$ 42.6 billion at end of March Given the high volume of excess liquidity at the banking system, the CBE continued to conduct longer-term deposit acceptance operations with maturities ranging between 28 and 210 days. At end of March 2018, the balance of deposits averaged LE 603 billion or 92.6 percent of total liquidity absorbed by the CBE. To make liquidity management more flexible, the CBE introduced at the beginning of March 2018 a new method for calculating the interest rate on its regular deposit acceptance operations. This method is based on applying a mechanism for linking deposits with different maturities to a corridor linked rate (variable), to allow for changing the interest rate over the term of the operation according to the decisions taken in this regard.

23 -15-2/1/2- Reserve Money (M0) Reserve money scaled up by LE billion or 17.3 percent during July/March 2017/2018 to LE billion at end of March The increase in reserve money was reflected in the rise in banks' local currency deposits at the CBE by LE billion or 82.9 percent to register LE billion at end of March Meanwhile, the currency in circulation outside the CBE retreated by LE 3.9 billion or 0.9 percent to LE billion, representing 66.1 percent of reserve money at end of March LE bn (20) Growth Rate of Reserve Money & Change in its Components (3.9) July - March 2016/2017 July - March 2017/2018 Change in currency in circulation outside the CBE Change in banks' deposits in local currency at the CBE Growth rate of reserve money (right axis) % (4) The breakdown of the currency in circulation by denomination at end of March 2018 showed a decline in the relative importance of both the LE 100 note and the LE 50 note, and a rise in the relative importance of the LE 200 note (see the following chart). As a result, the average value of the note decreased to LE at end of March 2018 (against LE at end of June 2017). Relative Importance of Currency in Circulation by Denomination 57.8% 3.7% 3.5% 6.3% 55.0% 35.2% 5.2% 33.3% Other Denominations LE 50 LE 100 LE 200 Inner Circle (June 2017) Outer Circle (March 2018) As for the banknote issue, it rose by LE 0.6 billion during July/March 2017/2018 to LE billion at end of March 2018 or 10.6 percent of GDP during the year ending March Components of the note issue cover ran as follows: gold made up LE 49.6 billion worth or 10.9 percent, and foreign currencies and notes LE billion worth or 89.1 percent.

24 -16- Regarding the counterpart assets of reserve money, net foreign assets increased by LE billion, contributing 43.5 percentage points to reserve money growth. The increase in net foreign assets at the CBE during July/March 2017/2018 came as a consequence of the pickup in its foreign assets by LE billion worth or 32.8 percent, and the drop in foreign liabilities by LE 70.4 billion worth or 12.9 percent. LE bn (200) Net Foreign Assets (44.9) June-16 March-17 June-17 March-18 LE bn (60) Foreign Assets Foreign Liabilities Net Foreign Assets (right axis) Meanwhile, net domestic assets fell by LE billion worth, thus curbing the reserve money growth by 26.2 percentage points. LE bn Net Domestic Assets LE bn (50) (250) (450) (156.1) (284.0) (291.9) (427.1) June-16 March-17 June-17 March Net Claims on Government Other Items (net) Net Claims on Banks Net Domestic Assets (right axis) The fall in net domestic assets at the CBE during the period was a result of the following developments:

25 -17- The decline in the CBE's net claims on the government by LE 71.7 billion or 10.1 percent due to the retreat in the CBE's claims on the government by LE 52.7 billion, and the rise in government's deposits at the CBE by LE 19.0 billion. The increase in the CBE's net claims on banks by LE 55.7 billion, owing to the rise in the CBE's claims on banks by LE 45.3 billion and the retreat in foreign currency deposits of banks at the CBE by LE 10.4 billion worth. The rise in the negative balance of net balancing items by LE billion causing as such a contractional effect on reserve money. This was attributed to the increase in deposits accepted by the CBE by LE billion, on the one hand, which was mitigated by the rise in other assets and liabilities (net) by LE 65.2 billion, on the other. 2/1/3- Domestic Liquidity (M2) and Counterpart Assets In July/March 2017/2018, domestic liquidity (M 2 ) moved up by LE billion or 14.6 percent, totaling LE billion at end of March 2018 (representing 78.4 percent of GDP in the year ending March 2018). This pickup was reflected in the growth of quasi-money and money supply. The quasi-money grew by LE billion or 16.6 percent to LE billion, and money supply (M 1 ) by LE 57.7 billion or 8.2 percent to LE billion. Domestic Liquidity Structure End of March 2018 Money supply 22.9% Quasi-money 77.1% Time & saving deposits in local currency 56.4% Foreign currency deposits 20.7%

26 -18- The growth in quasi-money during the period came as a consequence of the following developments: The increase in LE time and saving deposits by LE billion or 24.3 percent to LE billion at end of March The increase was due to the hike in the deposits of the household sector by LE billion or 25.3 percent to LE billion, the deposits of the private business sector by LE 21.3 billion or 16.3 percent to LE billion, and those of the public business sector by LE 1.6 billion or 6.8 percent to LE 24.7 billion. The decrease in foreign currency deposits by LE 0.6 billion worth or 0.1 percent to LE billion. This decrease was an outcome of the drop in the deposits of the private business sector by LE 3.4 billion worth. This drop was mitigated by the increase in the deposits of the public business sector by LE 1.8 billion worth, and those of the household sector by LE 1.0 billion worth. The ratio of foreign currency deposits to total deposits at banks (dollarization rate) reached 23.7 percent at end of March 2018, against 27.8 percent at end of June The rise in money supply during the period was attributed to the following developments: The pickup in LE demand deposits at banks by LE 60.2 billion or 20.9 percent to LE billion. This came on the back of the increase in the deposits of the private business sector by LE 31.1 billion or 20.3 percent to LE billion, of the household sector by LE 21.7 billion or 19.2 percent to LE billion, and of the public business sector by LE 5.9 billion or 24.6 percent to LE 30.1 billion. The decrease in the currency in circulation outside the banking system by LE 2.5 billion or 0.6 percent to LE billion at end of March Regarding the contribution of the counterpart assets of domestic liquidity to its growth, net foreign assets made the largest contribution (9.2 percentage points), while net domestic assets contributed only 5.4 percentage points. Net foreign assets at the banking system increased by LE billion worth in July/March 2017/2018, owing to the surge in net foreign assets at the CBE by LE billion worth, and at banks by LE 15.5 billion worth.

27 -19- (LE bn) (50) (100) Net Foreign Assets (44.9) (42.5) (50.7) June 2016 March 2017 June 2017 March 2018 Net Foreign Assets at the CBE Net Foreign Assets at Banks Net Foreign Assets Net domestic assets at the banking system rose by LE billion or 5.5 percent during July/March 2017/2018 to LE billion at end of March The rise was an outcome of the increase in banks' domestic credit by LE billion or 5.3 percent to register LE billion at end of March This was curbed by the increase in the negative balance of net balancing items by LE 7.3 billion or 2.9 percent (as a result of the decline in net unclassified assets and liabilities by LE 32.4 billion, on the one hand, and the drop in capital accounts by LE 25.1 billion, on the other). Relative Structure of Domestic Credit by Sector End of March 2018 Claims on household sector 8.4% Claims on private business sector 23.0% Net claims on government 63.6% Claims on public business sector 5.0%

28 -20- The pickup in domestic credit during the period was an outcome of the following developments: The net credit extended by the banking system to the government rose by LE billion or 5.3 percent, reaching LE billion or 63.6 percent of total credit at end of March The rise was due to the surge in banks' holdings of government securities and TBs by LE 93.5 billion, and in loans to the government by LE 44.9 billion. This was mitigated by the surge in government deposits by LE 33.7 billion. Credit to the household sector stepped up by LE 36.4 billion or 15.3 percent to register LE billion at end of March Credit to the public business sector scaled up by LE 13.7 billion or 9.2 percent to LE billion at end of March Credit to the private business sector moved up by LE 10.9 billion or 1.5 percent to LE billion at end of March /1/4 Payment Systems & Information Technology (IT) During July/March 2017/2018, the payment systems and IT sector witnessed a number of achievements, the most important of which are the following: The company selected to implement the permanent Disaster Recovery (DR) site for the CBE has completed its work. A preliminary handover was made and the installation of the technological devices and equipment necessary for the operation of the site has started. The project is expected to be completed in Q4 2017/2018. Under its plan of upgrading the payment systems and IT sector, the CBE's BoD agreed on December 17, 2015, to entrust the National Defense Council with the implementation of the project of "developing and upgrading the main information center in El Gomhoureya building and readjusting its infrastructure" to meet the work requirements of the CBE and banking sector. The project is scheduled to be completed in Q4 2017/2018. Work is underway to develop the archive and microfilm working system through an electronic digital-to-microfilm conversion project, while maintaining a digital archive for internal retrieval. In this regard, paper archive platforms are upgraded, and an alternate microfilm library is being established at the CBE Printing House in Haram. Also, systems for surveillance, automatic fire alarm & fire fighting and entry and exit

29 -21- monitoring were developed. The National Defense Council has been commissioned to implement this project which is expected to be finalized in Q2 2018/2019. The CBE has launched an electronic platform that links the Egyptian banks with COMESA's Regional Payment & Settlement System (REPSS). The system aims at executing transactions with the African commercial banks of COMESA's member states. The REPSS is run by the COMESA Clearing House, with the aim of enhancing and promoting intra-trade and facilitating funds transfer within the member states. Moreover, the CBE currently works on developing the internal systems, so as to enhance and develop the electronic linking system among the Egyptian banks within the framework of launching the next phase that reduces the time period for implementing REPSS payments. All the CBE's sectors - in cooperation with the Legal Affairs and Central Risks Sectors - are preparing the working regulations regarding the CBE's archives (papers or microfilms) in terms of their prescribed legal durations. It is expected to be completed in Q4 2017/2018. The CBE is working on expanding financial inclusion by enhancing access to convenient banking services. An example of these services is the mobile wallet whose users exceeded so far five and a half million persons. The CBE also aims at widening access to this service, especially small-value transactions, for all society segments. At present, final amendments are made to the service-specific rules. Establishing a clearing & settlement depository system (CSD) for government securities, 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 (EBRD) and African Development Bank (AfDB). The project aims at establishing a clearing & settlement depository system (CSD) to replace the Book Entry System currently in operation, and an auction system to replace the existing system, in addition to an electronic trading platform, and a collateral management system. Moreover, a committee was formed for project management, and contracts related to the grant extended by the two aforementioned banks were concluded. In addition, the prequalification document for potential suppliers was issued and the committee in charge is in the final phase of suppliers selection. The project is expected to be finished by Q4 2017/2018.

30 -22- Upgrading the current version of Real Time Gross Settlement System (RTGS) in Egyptian pound. Related softwares are being updated and modified as a step towards the actual implementation of the project that is expected to be finished by Q4 2017/2018. SWIFT software will be changed from Turbo to Alliance system. The specialized companies submitted their offers and the project is in progress and is expected to be finished by Q4 2017/2018. The CBE has completed the application of the system of SMEs financing initiative, which aims at funding new equipment and machinery required for industrial purposes. The system is currently applied at all banks operating in Egypt. The CBE's BoD has agreed on establishing Computer Security Incident Response Center (CSIRC) for the banking sector with the aim of mitigating the adverse effects of cyber-attacks on the banking sector. In this context, the CBE is coordinating with the Central Department of Administrative Affairs to launch the executive procedures concerning the handover of the headquarters. Telephony communication networks at the Head Office were upgraded and connected with some branches to overcome the incompatible properties of the aging PBX phone system. The CBE telephony communication system is being developed due to the increasing number of users of digital phones at the Bank and the urgent need for an advanced call center with reporting system. The project is scheduled to be completed by Q2 2018/ /1/5- Transactions Conducted via SWIFT A- RTGS Transactions - Automated Clearing House According to the statistics of the CBE Automated Clearing House that applies the RTGS, the number of bank cheques in Egyptian pound reached 8.1 million at a value of LE billion during July/March 2017/2018. As a result, the average value per cheque surged to LE thousand from LE 95.7 thousand in the previous corresponding period.

31 July/March -23- CBE Automated Clearing House Activity Number of Cheques (Thousand) Value of Cheques (LE bn) Rate of Change (%) Number Value 2015/ / (5.5) / (15.6) Other Banking Transactions Local bank transfers in Egyptian pound under the RTGS system showed a rise in the number of messages to 1.3 million during the period under review, while their value declined to LE billion. Notably, these transfers comprise bank and customer transfers, 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. Bank Transfers (in local currency) July/March Number of Messages Value of Transfers (LE bn) Change + (-) During the Period (Unit) Number Value 2015/ / / (1214) B- Bank Transactions in Foreign Currency Under the Fin-Copy System Transactions executed in foreign currencies (US dollar interbank) under the Fin-Copy system recorded 15.8 thousand, at a value of US$ 13.3 billion during July/March 2017/2018. July/March Bank Transfers in US Dollar Number of Messages (Unit) Value of Transfers (US$ mn) Change + (-) During the Period Number Value 2015/ (1019) (61) 2016/ (233) 2017/

32 2/2/1-Supervision Sector -24-2/2- 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 the said Program was mainly fruitful as regards Basel II implementation 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 main pivotal points, as follows: 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).

33 -25- 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 guarantee a sound coverage of their risks, as well as to encourage them to develop and use appropriate riskmanagement techniques to monitor, manage, measure and address all the risks they are vulnerable to. Out of its keenness to apply the international best practices, especially Basel III requirements, the CBE's BoD approved in its two sessions on 7 April and 13 July 2016 the implementation of the Capital Conservation Buffer and the issuance of the supervisory regulations pertaining to liquidity risk management, respectively, as follows: 1- Capital Conservation Buffer In order to ensure the coverage of losses that may arise during times of stress or financial crises and to conserve 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 Supervisory Regulations of Liquidity Risk Management 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: Maintain a total minimum ratio of 100%. Maintain a minimum ratio of 100% for each of local and foreign currencies.

34 -26- In light of applying the international best practices related to Basel III requirements, the discussion paper on Interest Rates Risk in Banking Books (IRRBB) was updated. Also, a study of its quantitative effects was conducted in March 2018 in light of the requirements issued by Basel Committee on Banking Supervision (BCBS) in April 2016 in this regard. In continuation of the efforts of the CBE to implement all of Basel requirements (the three pillars), the regulatory instructions related to the disclosure requirements of the third pillar are under preparation, in accordance with the requirements of BCBS. Concerning on-site supervision, the following points were observed during the period under review: First: Conducting on-site supervision over banks operating in Egypt for verifying the following points: The soundness of banks' financial positions and verifying that the financial data therein are identical to those in banks' records. Estimating the size and level of risks, deficiencies in risk management systems and their causes, and proposing corrective plans. Banks' compliance with the provisions of Law No. 88 of 2003 of the Central Bank, its executive regulations, the subsequent amendments thereto, and all the instructions and decisions issued by the CBE. The sufficiency of the provisions required for facing risks especially in case of non-performing loans, in order to guarantee the safety of depositors' and shareholders' funds. The accuracy of the data reported to the Off-site Supervision Sector at the CBE; especially those related to the mandatory regulatory ratios. The adequacy of impairment losses to meet bank's impaired assets. The soundness of internal supervisory systems and compliance with governance and anti-money laundering regulations. The suitability of capital adequacy to the size of the risks to which the bank is vulnerable.

35 -27- The evaluation of computer related operations and the adequacy of the existing systems and programs to serve bank's operations as well as its plan to ensure business continuity and contingency plan. The assessment of bank's performance according to the components of CAMELS rating system and risks through some indicators to identify the financial position of any bank and determine its classification according to the requirements of the regulatory authorities as well as the risk-based assessment. Second: Focusing on the developments of banking instructions, especially the following: Regulations of financing SMEs according to the instructions issued by the CBE s initiatives. Basel III liquidity ratios (Liquidity Coverage Ratio LCR and the Net Stable Funding Ratio NSFR ). The Internal Capital Adequacy Assessment Process (ICAAP) applied as of March 2017, as well as the experiences of implementing the International Financial Reporting Standard (IFRS) 9. The supplementary capital requirements for absorbing losses, which will be applied to Domestic Systemically Important Banks (DSIBs) as of /2/2 - Overview of Aggregate Financial Position of Banks The aggregate financial position of banks (excluding the CBE) hiked by LE billion or 15.6 percent in July/March 2017/2018 (compared with LE billion or 48.1 percent in the same period of the previous FY), to reach LE billion at end of March The rise on the liabilities side emanated from the rise in deposits at banks by LE billion or 14.5 percent, posting LE billion at end of March Increases were also observed in (i) equities at banks by LE 50.8 billion, (ii) obligations to banks in Egypt by LE 17.6 billion, (iii) bonds & long-term loans by LE 16.7 billion, (iv) provisions by LE 6.4 billion, and (v) other liabilities by LE billion. Meanwhile, obligations to banks abroad declined by LE 17.6 billion.

36 -28- Relative Importance of the Items of Shareholders' Equities and Liabilities (End of March 2018) Equities 7.1% Other Liabilities 10.6% Provisions 2.2% Bonds & Longterm Loans 2.8% Obligations to Local Banks 5.9% Obligations to Banks Abroad 3.5% Total Deposits 67.9% On the assets side, the increase stemmed from the growth in balances with banks in Egypt by LE billion or 31.0 percent, (mainly due to the rise in balances of banks at the CBE by LE billion, which was mitigated by the decline in balances of other banks in Egypt by LE 23.9 billion) to stand at LE billion at end of March Likewise, banks' investments in securities and bills increased by LE billion, lending and discount balances by LE billion, balances with banks abroad by LE 18.5 billion worth, and other assets by LE billion. However, cash balances went down by LE 5.6 billion. Relative Importance of the Assets' Items (End of March 2018) Loan & Discount Balances 30.3% Other Assets 7.7% Cash 1.0% Securities & Investments in TBs 32.6% Balances with Banks Abroad 5.9% Balances with Local Banks 22.5% The increase in banks' investments in securities and bills was an outcome of their higher investments in Treasury bills by LE billion, and corporate equities by LE 3.3 billion. However, such increase was curbed by the retreat in banks' investments in foreign securities by LE 2.8 billion worth, government bonds by LE 1.1 billion, and non-government bonds by LE 0.3 billion.

37 -29-2/2/3- Interbank Transactions In July/March 2017/2018, transactions of local banks with correspondents abroad unfolded an increase in their net credit balances with banks abroad by LE 36.1 billion worth, to LE billion worth at end of March 2018 (against a credit balance of LE 89.4 billion worth at end of June 2017). This increase was a result of the pickup in their balances with banks abroad by LE 18.5 billion worth and the decline in their obligations therewith by LE 17.6 billion worth. As for interbank transactions in Egypt (excluding the CBE), the volume of transactions in money market (in terms of deposits) dropped by LE 23.9 billion or 15.2 percent in the period under review (against a rise of LE billion in the same period of the previous FY), bringing total deposits to LE billion at end of March Such a decline was an outcome of the decrease in foreign currency deposits by LE 27.8 billion worth, which was mitigated by the pickup in local currency deposits by LE 3.9 billion. 2/2/4 - Deposits Banks' deposits (including government deposits) grew by LE billion or 14.5 percent during July/March 2017/2018 (versus LE billion or 35.0 percent), to LE billion. The household sector accounted for 83.7 percent of the total increase in banks' deposits, followed by the private business sector with 11.2 percent. The increase in banks' deposits stemmed from the growth of local currency deposits by LE billion or 25.4 percent to LE billion (accounting for 76.7 percent of total deposits at end of March 2018). Meanwhile, foreign currency deposits declined by LE 98.6 billion worth or 10.9 percent to LE billion worth at end of March The increase in local currency deposits was due to the rise in the deposits of the household sector by LE billion or 24.9 percent to LE billion (representing 69.3 percent of total deposits in local currency at end of March 2018). Deposits of the government sector increased as well by LE billion or 36.3 percent to LE billion, the private business sector by LE 52.5 billion, the public business sector by LE 7.5 billion, and the external sector by LE 0.7 billion.

38 -30- LE bn 400 Change in Sectors' Local Currency Deposits During July/March Government Sector Public Business Sector Private Business Sector Household Sector External Sector 2016/ /2018 The drop in foreign currency deposits (expressed in LE) by LE 98.6 billion was attributed to the decrease in deposits of both the government sector by LE 97.6 billion and the private business sector by LE 3.4 billion. However, such decline was mitigated by the pickup in deposits of the public business sector by LE 1.9 billion and the household sector by LE 1.0 billion. LE bn (50) (100) 91.6 (97.6) Government Sector Change in Sectors' Foreign Currency Deposits During July/March Public Business Sector 92.1 (3.4) Private Business Sector Household Sector 3.7 (0.5) External Sector 2016/ /2018

39 -31-2/2/5- Lending Activity Banks' lending and discount balances to customers reached LE billion (accounting for 30.3 percent of total assets and 44.7 percent of total deposits at end of March 2018), up by LE billion or 8.6 percent during July/March 2017/2018 (against an increase of LE billion or 42.5 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 billion or 15.6 percent to LE billion at end of March Add to this the decline in balances in foreign currencies by LE 11.7 billion worth or 2.1 percent to LE billion worth at end of March The pickup in lending and discount balances in local currency came on the back of the rise in loans extended to the government sector by LE 59.5 billion or 41.7 percent to LE billion at end of March Another contributing factor was the increase in loans extended to the household sector by LE 34.6 billion or 14.9 percent, the private business sector by LE 28.0 billion or 7.1 percent, and the public business sector by LE 12.8 billion or 13.4 percent. The decline in lending and discount balances in foreign currencies (expressed in LE) over the period resulted from the lower loans extended to the private business sector by LE 18.2 billion or 6.5 percent, to register LE billion (accounting for 47.7 percent of total lending and discount balances in foreign currencies at end of March 2018). Moreover, loans to the external world moved down by LE 2.3 billion. In contrast, loans to the government sector went up by LE 6.4 billion, the household sector by LE 1.8 billion, and the public business sector by LE 0.6 billion. LE bn (20) Government sector Public business sector Change in Lending and Discount Balances by Sector During July/March Local currency Private business sector Household sector External sector Government sector Foreign currencies Public business sector Private business sector 3.4 (18.2) 1.8 Household sector 2016/ / (2.3) External sector

40 -32- The relative distribution of loans by economic activity indicates that the manufacturing sector was the major recipient with a share of 40.1 percent of loans extended by banks in both local and foreign currencies at end of March The unclassified sectors, including the household, came next with a share of 28.4 percent, followed by services (23.0 percent), then trade (7.7 percent) and agriculture (only 0.8 percent). Loans & Advances by Banks Excluding Discounts (End of) LE bn One Year or Less Over One Year June 2017 March 2018 June 2017 March 2018 Local Currency Foreign Currencies At end of March 2018, banks' loans and advances (excluding discounts) by maturity registered LE billion, up by LE billion or 8.5 percent during the reporting period. The increase was ascribable to the rise in local currency loans (one year or less) by LE 36.3 billion or 10.4 percent, and local currency loans (more than one year) by LE 95.6 billion or 18.7 percent. Meanwhile, foreign currency loans (one year or less) declined by LE 11.5 billion worth or 4.0 percent and foreign currency loans (more than one year) by LE 0.5 billion worth or 0.2 percent.

41 Non-Banking Financial Sector * 3/1- Stock Market The performance of The Egyptian Exchange in July/March 2017/2018 showed an increase in all price indices, except for the Nile Index. Its benchmark index (EGX 30) rose by 30.3 percent to points at end of March 2018 against points at end of June Also, EGX 20 Capped increased by 43.8 percent to points at end of March 2018 against points at end of June 2017; and EGX 50 EWI by 43.8 percent to points against points at end of June EGX 70 went up by 34.1 percent to points against points; and EGX 100 by 48.3 percent, to points, against points. Meanwhile, The Nile Index - which reflects the performance of small- and medium-sized enterprises listed on the Nile Stock Exchange (NILEX) - fell by 5.1 percent, to points at end of March 2018 against points at end of June Point The Benchmark EGX 30 Index Sectoral Indices All sectoral indices increased during July/March 2017/2018. Tourism and leisure outperformed other sectors, gaining percent, followed by services, industrial goods and automobiles (115.3 percent), then communications (2.1 percent). * Source: Financial Regulatory Authority (FRA) and EGX's monthly reports.

42 -34- Sectoral Indices Sector At End of Change + (-) in July/March June 2017 March /2018 (%) Tourism and leisure Services, industrial goods and automobiles Chemicals Personal and household products Real estate Basic resources Financial services (exc. banks) Healthcare and pharmaceuticals Food and beverages Banks Construction and building materials Communications As regards the primary market, the number of new issues approved by the Financial Regulatory Authority (FRA) during the period under review reached 4508, with a total value of LE billion (versus 3258 new issues, totaling LE 58.4 billion in the same period of the previous FY). Of this figure, issues for new businesses reached 2689 in number or 59.6 percent of total issues, at a value of LE 28.1 billion. Meanwhile, the number of issues for capital increases of existing companies reached 1819, totaling LE billion or 82.4 percent of the total value of issues. The listing activity on the EGX showed that the number of listed companies registered 222 at end of March 2018 (the same number at end of June 2017). Meanwhile, their market capitalization gained 41.7 percent, amounting to LE billion at end of March 2018 (against LE billion at end of June 2017), on the back of the increase in the prices of most shares traded on the EGX. The value of issued and listed bonds rose by LE 4.5 billion or 0.6 percent during the period under review, to LE billion at end of March 2018 (against LE billion at end of June 2017). This was mainly due to an increase of LE 6.1 billion in the value of Egyptian Treasury bonds (primary dealers) during the period, to LE billion (or 99.1 percent of the total value of listed bonds at end of March 2018). This increase was curbed by the decline in both corporate and securitization bonds by LE 1.2 billion and LE 0.4 billion, respectively.

43 -35- Concerning trading in the secondary market (including NILEX), the volume of traded securities (shares, bonds and mutual funds' certificates) and the number of transactions increased, whereas the value of traded securities declined. In figures, the volume of traded securities rose by 3.4 billion or 5.7 percent, recording 63.4 billion and the number of transactions moved up by 0.4 million or 8.2 percent to 5.7 million. In the meantime, the value of traded securities fell by LE 14.4 billion or 5.5 percent to LE billion. Share turnover on the EGX surged to 94.7 percent of total value of trading (against 86.4 percent in the corresponding period a year earlier). However, trading in bonds and mutual funds' certificates captured 4.5 percent and 0.8 percent, respectively, declining from 12.7 percent and 0.9 percent. Trading in Securities July/March 2016/ /2018 No. of Transactions (000s) A- Shares, bonds and mutual funds' certificates (listed) B- Shares, bonds and mutual funds' certificates (unlisted) C- Small and medium enterprises market (NILEX) Trading Volume (mn) A- Shares, bonds and mutual funds' certificates (listed) B- Shares, bonds and mutual funds' certificates (unlisted) C- Small and medium enterprises market (NILEX) Trading Value (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: FRA and EGX's monthly reports. Turning to small and medium enterprises market (NILEX), the number of listed companies reached 32, with a market capital of LE 1.2 billion at end of March The volume of traded securities recorded 0.4 billion, executed through 52 thousand transactions, with a total value of LE 0.4 billion.

44 -36- As regards the Exchange Traded Funds (ETFs) which track the EGX 30 index, the volume of traded securities recorded 2.9 million, with a total value of LE 44.4 million during the period under review. Transactions on the EGX (excl. Primary Dealers) Foreign investors' transactions (purchases and sales) on the EGX rose by 28.7 percent during July/March 2017/2018, to LE billion (against LE billion in the corresponding period a year earlier). Their dealings resulted in net purchases of LE 5.4 billion (against LE 5.0 billion in the period of comparison). LE bn Foreign Investors' Transactions During July/March 2016/ /2018 Purchases Sales Net Egyptians' trading on the EGX accounted for 68.6 percent of total transactions during July/March 2017/2018, while that of foreign investors represented 31.4 percent.

45 Public Finance 4/1- The Budget Sector (Administrative system, Local Administration and Service Authorities) According to the data on the actual execution of fiscal operations of the state budget (administrative system, local administration and service authorities) released by the Ministry of Finance for July/March 2017/2018, the overall deficit widened by LE 3.0 billion to LE billion (against LE billion in the same period a year earlier). Despite the rise in the deficit as an absolute value, its percentage of GDP fell to 6.7 percent (from 7.9 percent). Also, the primary deficit as a percentage of GDP declined from 1.2 percent to 0.2 percent. The drop in both the overall and primary deficits as a percentage of GDP (during the period under review relative to the corresponding period of the preceding FY) mirrored the continuous positive impacts of the reforms and measures recently taken in the area of public finance to achieve fiscal discipline under the comprehensive economic reform program currently adopted by the government. Revenues, Expenditures, and Overall & Primary Budget Deficit as a Percentage of GDP During July/March Revenues & Expenditures 25.0 Overall & Primary Budget Deficit (%) (%) / / / Revenues Expenditures Overall Budget Deficit Primary Deficit Total revenues of the budget sector registered LE billion (12.1 percent of GDP) during July/March 2017/2018, against LE billion (10.5 percent of GDP) in the corresponding period a year earlier, up by LE billion or 36.9 percent. This was a dual effect of the increase in tax revenues by LE billion or 49.9 percent, to LE billion (81.0 percent of total revenues); and the decline in non-tax revenues by LE 0.2 billion or 0.2 percent, to LE 94.6 billion (19.0 percent of total revenues), as illustrated in the chart below:

46 -38- Total Revenues During July/March Non-Tax Revenues 19.0% 26.1% Tax Revenues 2016/ % 81.0% 2017/2018 The surge in tax revenues by LE billion was explained by the following developments: Value-added taxes on goods and services increased by LE 77.9 billion or 59.8 percent. This was mainly owed to the increase in the general tax rate on goods and services by one percentage point, from 13 percent to 14 percent as of the beginning of the FY under review, according to the provisions of Article (3) of Law No. 67 for Add to this the rise in the proceeds from taxes on local & imported goods, local & international communications services, stamp duties on contracts of water, electricity, gas and telephone companies, as well as advertisements, transportation services and insurance. Taxes on income and capital gains augmented by LE 37.3 billion, due to higher proceeds of taxes from: (1) EGPC by LE 15.5 billion, (2) salaries by LE 10.3 billion, (3) Suez Canal by LE 5.5 billion, and (3) other entities by LE 9.9 billion. By contrast, proceeds from taxes on profits from the CBE retreated by LE 3.9 billion. Property taxes moved up by LE 13.1 billion or 56.7 percent, reflecting the rise in revenues from taxes on T-bills and bonds' payable interest. Taxes on international trade (customs) increased by LE 6.4 billion, as a result of the increase in merchandise imports by LE billion. Other miscellaneous taxes retreated by LE 0.4 billion.

47 -39- Tax Revenues, Property Income & Grants as a Percentage of Total Revenues During July/March (%) / / /2018 Tax Revenues Property Income Grants The decline in non-tax revenues by LE 0.2 billion came as a confluence of the following developments: Property income retreated by LE 21.6 billion mainly because of the lower transfers from the CBE by LE 12.7 billion, Suez Canal by LE 5.6 billion and economic authorities by LE 2.8 billion. However, such retreat was mitigated by the increase in property income from the EGPC by LE 2.6 billion and other companies by LE 1.7 billion. External grants decreased by LE 0.1 billion during this period. Financing investments increased by LE 7.9 billion. Proceeds from selling goods and services grew by LE 3.6 billion, owing to the increase in receipts from special accounts and funds during this period. Other non-tax revenues surged by LE 10.0 billion.

48 -40- Fiscal Operations of the Budget Sector (Public Revenues) Actual (LE bn) July/March 2016/ /2018 Change +/(-) Relative Structure (%) Actual Relative Structure (%) Value Total Revenues Tax Revenues Taxes on Income and Profits From EGPC From SCA From CBE (3.9) Payable by individuals Other entities Taxes on Property Taxes on Goods & Services Taxes on International Trade (customs) Other Taxes (0.4) Non-Tax Revenues (0.2) Property Income (21.6) From EGPC From SCA (5.6) From CBE (12.7) Economic authorities (2.8) Companies Others (4.8) Selling Proceeds of Goods and Services Financing Investments Grants (0.1) Current (0.2) Capital Others Source: Table (4/1) in the Statistical Annex. Percentages are calculated in terms of LE million. Total expenditures reached LE billion (18.8 percent of GDP) during July/March 2017/2018, compared with LE billion (18.2 percent of GDP) in the same period a year earlier, up by LE billion or 22.3 percent.

49 -41- Total Expenditures During July/March Other Expenditures Purchases of Non-Financial Asssets (Investments) 7.7% 6.7% 22.2% Compensations & Wages of Employees Subsidies, Grants & Social Benefits 24.9% 20.3% 7.2% 6.9% 2016/ % 3.9% 3.8% Purchases of Goods & Services 36.7% 2017/ % Interest on Domestic & External Debt The increase in total expenditures was an outcome of the following developments: - The rise in subsidies, grants and social benefits by LE 64.4 billion, mainly as follows: Subsidy costs rose by LE 50.0 billion, (against a rise of only LE 18.6 billion in the same period of FY 2016/2017, to reach LE billion or 16.5 percent of total expenditures). This was a result of the pickup in oil subsidies by LE 33.0 billion, as well as supply commodities by LE 17.7 billion, and the decline in other miscellaneous subsidies by LE 0.7 billion. Social benefits moved up by LE 12.7 billion, ascribable to the higher contribution of the State to pension funds, against an increase of LE 4.4 billion in the same period of FY 2016/2017. Grants extended by the government to some international institutions, foreign governments and general government entities scaled up by LE 1.5 billion. - The increase in interest payments on domestic and external debts by LE 37.2 billion, against an increase of LE 55.0 billion in the same period of FY 2016/2017.

50 -42- Wages & Compensations of Employees, Paid Interest and Subsidies as a Percentage of Total Expenditures During July/March (%) / / /2018 Wages & Compensations of Employees Paid Interest Subsidies - The remarkable growth in investments of budget sector related entities by LE 13.9 billion (against an increase of about LE 9.2 billion in the same period of FY 2016/2017), as the government continued to increase public investments to develop the infrastructure, and to expand both housing projects and investments in health and education sectors. This reflects the government's determination to go ahead with achieving the aspired objectives of the economic reform program. - The rise in State employees' wages and compensations by LE 13.6 billion, against an increase of LE 2.3 billion in the corresponding period of FY 2016/ The increase in spending on purchases of goods and services by LE 4.6 billion, against an increase of LE 3.4 billion in the same period a year earlier. - The increase in some other current miscellaneous expenditures by about LE 6.9 billion.

51 -43- Fiscal Operations of the Budget Sector (Public Expenditures) Actual (LE bn) July/March 2016/ /2018 Change + (-) Relative Relative Structure Actual Structure (%) (%) Value Total Expenditures Employees' Wages & Compensations Salaries & Allowances Insurance Benefits Others (0.6) Purchases of Goods & Services Goods Services Others (0.6) Interest Domestic To NIB & SIFs To others Foreign Subsidies, Grants & Social Benefits Subsidies To EGPC To GASC Others (0.7) Grants Social Benefits To SIFs Others Others Other Expenditures Defense Others Purchases of Non-Financial Assets (Investments) Fixed assets Others (2.3) Source: Table (4/2) in the Statistical Annex. Percentages are calculated in terms of LE million. Against this background, the cash deficit of the budget sector reached LE billion or 6.7 percent of GDP during July/March of FY 2017/2018. The overall deficit (including the net acquisition of financial assets) rose by LE 3.0 billion to post LE billion or 6.7 percent of GDP (against LE billion or 7.9 percent of GDP in the same period a year earlier). As for financing the

52 -44- overall budget deficit, it reached LE billion in July/March 2017/2018, of which LE billion * or 43.6 percent of the deficit was financed by local sources and LE billion or 56.4 percent by external sources. 4/2 The General Government ** By adding the fiscal operations of the NIB and SIFs to those of the budget sector during July/March 2017/2018, total collected revenues would register LE billion (13.8 percent of GDP). Likewise, total expenditures would stand at LE billion (20.8 percent of GDP). Accordingly, the cash deficit of the consolidated fiscal operations of the general government posted LE billion during July/March 2017/2018. Moreover, the overall deficit of the general government (including the net acquisition of financial assets) amounted to LE billion (7.0 percent of GDP). Cash Deficit & Overall Deficit of the General Government as a Percentage of GDP During July/March Overall Deficit (%) Cash Deficit (%) / / / Overall Deficit Cash Deficit * Represents the algebraic sum of banking & non-banking financing items and difference between treasury bills face value & present value, as well as other discrepancy items. ** Including the budget sector, NIB and SIFs.

53 -45- Summary of Consolidated Fiscal Operations of the General Government (Budget Sector, NIB, and SIFs) Budget Sector Relative Structure (%) July/March 2016/ /2018 General Government Relative Structure (%) Budget Sector Relative Structure (%) General Government Total Revenues Total Expenditures Cash Surplus (+) / Deficit (-) Overall Fiscal Surplus (+) / (LE bn) Relative Structure (%) Deficit (-)* Primary Surplus (+)/Deficit (-) Financing Sources Domestic Financing Banking Financing CBE Other banks Non-Banking Financing NIB SIFs Others Borrowing from NIB Special accounts of economic authorities External Borrowing Others Difference between Treasury Bills Face Value & Present Value Discrepancy Source: Table (4/3) in the Statistical Annex. Percentages are calculated in terms of LE million. *Including the net acquisition of financial assets. 4/3- Domestic Public Debt At end of March 2018, domestic public debt amounted to LE billion (against LE billion at end of June 2017) up by LE billion or 11.9 percent in July/March 2017/2018. Though domestic public debt as an absolute figure increased, its ratio to GDP declined to 86.8 percent at end of March 2018 (versus 91.1 percent at end of June 2017). * Domestic public debt includes net debt of the government, public economic authorities, and the National Investment Bank (NIB), minus the intra-debt of both public economic authorities and the government to the NIB.

54 -46- Gross Domestic Debt at End of March 2018 (LE bn) Gross Domestic Debt Intra-Debt Net NIB Debt Net Public Economic Authorities Debt Net Domestic Debt of Government /3/1- Net Debt of the Government Net government domestic debt increased to LE billion at end of March 2018 (up by LE billion or 11.7 percent during the period under review) against LE billion at end of June However, its ratio to GDP retreated to 73.6 percent at end of March 2018 (from 77.4 percent at end of June 2017). The surge was due to: (i) the rise of LE billion in the balances of Treasury bonds and bills (mainly because of the increase in the balances of Treasury bills), (ii) the decline of LE 34.0 billion in net government balances at the banking system (because of the rise in both government's loans and deposits by LE 19.2 billion and LE 53.2 billion, respectively), and (iii) the drop in the value of the issued Masri Dollar Certificates by LE 0.2 billion and in facilities from SIFs by LE 0.3 billion.

55 -47- Domestic Debt of the Government (Net) (LE bn) June 2017 March 2018 Change + ( ) Balances at End of July/March Value % Value % 2017/2018 Domestic Government Debt (Net) Balances of Bonds & Bills Bonds, of which, Tradable on exchanges Treasury bills Facilities from SIFs (0.3) - Masri Dollar Certificates (0.2) - Net Balances at the Banking System (34.0) Credit facilities Deposits (-) 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 billion in the balances of bonds and bills resulted from the following: The Treasury bills increased by LE billion (due to the rise of LE billion in bills issued in Egyptian pound; the pickup of LE 2.0 billion worth in bills issued in euro; and the decline of LE 10.8 billion worth in bills issued in US dollar). The government bonds increased by only LE 2.6 billion. This was an outcome of the rise in (i) the value of the SIFs bonds (in return for transferring the NIB debt to the Public Treasury) by LE 20.3 billion; (ii) bonds issued abroad in US dollar by LE 13.7 billion worth; and (iii) Egyptian Treasury bonds by LE 3.9 billion, on the one hand, and the decline in the balance of other government bonds by LE 35.3 billion, on the other.

56 -48- LE bn Net Domestic Debt of the Government March 2017 June 2017 March 2018 Treasury Bills Bonds, Credit Facilities & Others Net Government Balances with the Banking System Net Government Domestic Debt /GDP % Net Domestic Debt of the Government/GDP 4/3/2- Net Debt of Public Economic Authorities In July/March 2017/2018, net debt of public economic authorities hiked by LE 65.0 billion to LE billion at end of March This was traceable to the pickup in their net borrowing from the banking system by LE 46.9 billion as well as the rise in their borrowing from the NIB by LE 18.1 billion. 4/3/3- Net Debt of NIB Net debt of NIB (including intra-debt) reached LE billion at end of March 2018, up by LE 61.9 billion in July/March 2017/2018. That was attributable to the increase in both total resources invested at the NIB by LE 63.6 billion to LE billion, and its deposits at the banking system by LE 1.7 billion.

57 -49- Resources of the NIB at End of March 2018 Uses of the NIB at End of March 2018 Post Office Saving Deposits 32.2% Proceeds of Dollar Development Bonds & Others 0.7% Social Insurance Funds 14.2% Investment in Treasury Bills & Bonds 19.4% Deposits w ith the Banking System 2.2% Proceeds of Investment Certificates & Accumulated Interest 52.9% Loans to Public Economic Authorities 17.1% Loans to Holding Companies & Affiliate Units, Concessional Lending & Others 61.3% 4/3/4- Intra-Debt Intra-debt of both public economic authorities and the government to the NIB reached some LE billion at end of March 2018 (against LE 84.3 billion at end of June 2017), up by LE 64.5 billion in July/March 2017/2018. NIB's investments in government securities (bills and bonds) amounted to LE 79.1 billion, up by LE 46.4 billion in the said period, while loans extended by the NIB to these authorities rose by LE 18.1 billion to LE 69.7 billion.

58 External Transactions 5/1- Foreign Exchange Market and NIRs In Q3 of FY 2017/2018, banks' resources of foreign currency amounted to US$ 16.0 billion (of which customer sales recorded US$ 10.6 billion and investment inflows US$ 5.4 billion), scoring a rise of 11 percent above the level of the preceding quarter, in which banks' total resources of foreign currency reached US$ 14.4 billion. CBE's resources of foreign currency amounted to US$ 11.8 billion in the reporting period (against US$ 11.7 billion in the corresponding period of the previous FY), while its uses reached US$ 3.9 billion (against US$ 5.2 billion). The weighted average of the US dollar reached LE at end of March 2018 (against LE at end of June 2017), with a 2.5 percent appreciation in the Egyptian pound. Net international reserves (NIR) at the CBE increased by US$ 11.3 billion or 36.1 percent in July/March 2017/2018, to US$ 42.6 billion at end of March 2018 (thus covering 8.1 months of merchandise imports, against 8.4 months at end of June 2018).

59 -51-5/2- Balance of Payments During July/March 2017/2018, Egypt's BoP overall surplus remained stable at US$ 11.0 billion, which is the same level of the period of comparison. This was due to the fact that the current account deficit retreated by 57.5 percent, reaching merely US$ 5.3 billion (against US$ 12.5 billion), and the capital and financial account achieved a net inflow of US$ 19.0 billion (versus US$ 27.1 billion). (US$ bn) Main Items of BOP Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Current Account Capital &Financial Account Overall Balance Below is a summary of the main factors that affected the BoP performance during the period under review compared with the same period a year earlier: The trade deficit narrowed by 1.3 percent, scoring US$ 28.0 billion (against US$ 28.4 billion) as the rise in export proceeds (17.6 percent) outstripped that of import payments (5.5 percent). The services surplus skyrocketed by percent to register US$ 7.8 billion (against US$ 3.3 billion), mainly due to the fact that travel receipts ran a surplus of US$ 5.5 billion (against US$ million) and the Suez Canal transit receipts picked up by 11.9 percent to record US$ 4.2 billion (against US$ 3.7 billion). Net unrequited current transfers rose by 23.2 percent to US$ 19.5 billion (against US$ 15.9 billion), mainly on the back of the increase in remittances of Egyptians working abroad by US$ 3.6 billion (due to the continuous positive effects of the decision of exchange rate liberalization). Investment income registered a deficit of US$ 4.7 billion, primarily due to the fact that investment income payments recorded US$ 5.3 billion, while investment income receipts were confined to US$ million.

60 -52- Net FDI in Egypt registered US$ 6.0 billion (inflows), mainly because the net investments of the oil sector recorded US$ 3.4 billion. Portfolio investment in Egypt surged, achieving a net inflow of US$ 14.9 billion (against US$ 7.8 billion). Medium- and long-term loans and facilities retreated, unfolding a net disbursement of only US$ 4.8 billion (against US$ 7.3 billion). The net change in the liabilities of the CBE to the external world switched to a net repayment of US$ 3.3 billion during the period under review (from a net disbursement of US$ 7.7 billion). Hereunder is a detailed review of the BOP items in the first nine months of FY 2017/2018, compared with the same period a year earlier: 5/2/1- Current Account The current account deficit retreated by 57.5 percent, mainly as a result of: (i) the surge in the services surplus by percent; (ii) the increase in net unrequited current transfers by 23.2 percent; and (iii) the drop in the trade deficit by 1.3 percent. Such a retreat in the current account deficit would have been higher but for the rise in the investment income deficit by 41.7 percent. This is thoroughly illustrated below: US$ bn Current Account's Main Components Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Trade Balance Services Balance Income Balance Current Transfers (net) Current Account

61 -53-5/2/1/1 - Trade Balance The trade deficit shrank by 1.3 percent in the reporting period to US$ 28.0 billion (from US$ 28.4 billion); because the rise in export proceeds outpaced that in import payments, as detailed below: US$ bn Trade Balance Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Merchandise export proceeds increased by 17.6 percent to US$ 18.8 billion (from US$ 16.0 billion). Such an increase was traceable to the rise in both oil and non-oil exports. The former rose by 29.2 percent to US$ 6.0 billion (from US$ 4.7 billion). The latter picked up by 12.9 percent to US$ 12.8 billion (from US$ 11.3 billion). Merchandise import payments slightly rose by 5.5 percent, registering US$ 46.8 billion (against US$ 44.4 billion), owing to the rise in both oil imports by 10.2 percent to US$ 9.4 billion (against US$ 8.5 billion) and non-oil imports by 4.4 percent to US$ 37.4 billion (against US$ 35.8 billion). Against this background, the coverage ratio of merchandise exports to merchandise imports went up to 40.2 percent in the reporting period (from 36.1 percent in the period of comparison).

62 -54-5/2/1/2- Balance of Services & Investment Income and Net Unrequited Current Transfers A- Services Balance: The services surplus surged to US$ 7.8 billion during July/March 2017/2018 (against US$ 3.3 billion); as the increase in services receipts outpaced that in services payments, as shown below: US$ bn Services Balance Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Services Receipts Services Payments Services Balance 1- Services Receipts Services receipts rose by 53.0 percent to US$ 15.8 billion (from US$ 10.3 billion), due to the rise in most items as follows: - Travel receipts (tourism revenues) jumped by percent, registering US$ 7.3 billion (against US$ 2.8 billion), owing to the increase in the number of tourist nights to 75.8 million (from 33.4 million), concurrent with the pickup in the average spending per tourist a night. US$ bn Travel Receipts and Their Percentage of GDP Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Travel Receipts (left axis) Travel Receipts/GDP %

63 Transportation receipts rose to US$ 6.4 billion (from US$ 5.5 billion). This was mainly ascribed to the increase in Suez Canal receipts by 11.9 percent, recording US$ 4.2 billion (versus US$ 3.7 billion), due to the rise in the net tonnage of transiting vessels by 9.3 percent and the appreciation of the SDRs versus the US dollar by 3.7 percent on average. Add to this the rise in the receipts of Egyptian navigation and aviation companies. - Government receipts picked up to US$ million (against US$ million), mirroring the increase in the receipts from the expenses of the Arab League and international institutions resident in Egypt, as well as the expenses of foreign embassies in Egypt. - On the other hand, other services receipts retreated by 5.0 percent to reach only US$ 1.7 billion (against US$ 1.8 billion), driven by the drop in the receipts of communication services; culture & recreation services; and legal & consultation fees. (US$ bn) Suez Canal Receipts and Net Tonnage million tons Q1 Q2 Q3 Q1 Q2 Q3 2016/ / Suez Canal Receipts Net Tonnage 2- Services Payments Services payments moved up by 13.1 percent to US$ 7.9 billion (from US$ 7.0 billion), owing to the increase in most items as follows: - The rise in other services payments by 22.0 percent to register US$ 3.9 billion (against US$ 3.2 billion), due to the increase in the amounts transferred abroad by foreign petroleum companies. Add to this the rise in the payments of communication services, royalties & license fees, computer services, and subscriptions for magazines & journals.

64 The rise in government expenditures by 75.3 percent to US$ 1.2 billion (from US$ million), owing to the increase in salaries & expenses of government employees seconded abroad and the expenses of Egyptian embassies abroad. - The increase in transportation payments by 18.4 percent to US$ 1.1 billion (from US$ million), reflecting the rise in the amounts transferred by foreign navigation and aviation companies; those transferred for aircraft and ship leasing, and those transferred for repairing aircrafts and ships at foreign airports and ports. - On the other hand, travel payments dropped by 22.2 percent to US$ 1.7 billion (from US$ 2.2 billion), on account of the fall in e-card payments abroad; the expenses of pilgrimage and Umrah; and payments of tourism companies and hotels abroad. B- Investment Income Balance The investment income balance recorded a deficit of US$ 4.7 billion (up from US$ 3.3 billion). This was mainly ascribed to the fact that investment income payments recorded US$ 5.3 billion (against US$ 3.6 billion), as profit transfers of foreign companies operating in Egypt (petroleum and nonpetroleum) constituted 57.2 percent of these payments. Likewise, investment income receipts rose from US$ million to US$ million. Investment Income Balance US$ bn Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Investment Income Receipts Investment Income Payments Investment Income Balance

65 -57- C- Net Unrequited Current Transfers Unrequited current transfers (net) rose during the period under review by 23.2 percent to US$ 19.5 billion (against US$ 15.9 billion), as a result of the following developments: - Net private transfers went up to US$ 19.5 billion (from US$ 15.8 billion), thanks to the increase in remittances of Egyptians working abroad by 22.9 percent. - Net official transfers mounted to US$ 93.5 million (from US$ 82.5 million). Country Period Saudi Arabia Egyptian Workers' Remittances by Main Country Value /2017* Relative Importance (%) 48.6 July/March Value /2018* (US$ mn) Relative Importance (%) 43.4 Kuwait UAE Qatar Other countries Grand Total * Preliminary 5/2/2 - Capital and Financial Account During July/March 2017/2018, the capital and financial account achieved a net inflow of US$ 19.0 billion (against US$ 27.1 billion), as a reflection of the following developments:

66 -58- US$ bn Foreign Direct Investment In Egypt Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 FDI Net Portfolio Investment in Egypt FDI in Egypt recorded total inflows of US$ 10.2 billion, while total outflows posted US$ 4.2 billion. Accordingly, net FDI in Egypt amounted to US$ 6.0 billion (inflows), mainly because net investments of the oil sector registered US$ 3.4 billion. The following table shows the sectoral distribution of total FDI flows to Egypt during the periods of review and comparison: (US$ mn) July/March Activity Sector 2016/2017 * Share (%) 2017/2018 * Share (%) Total FDI Flows to Egypt Oil Manufacturing Agriculture Construction Services, of which: Real estate Finance Tourism Communications & IT Other services Undistributed * Preliminary

67 -59- Portfolio investment in Egypt achieved a net inflow of US$ 14.9 billion (against US$ 7.8 billion), basically due to the rise in foreigners' investments in Treasury bills, recording net purchases of US$ 11.5 billion (against US$ 4.3 billion). Moreover, the Egyptian government issued bonds abroad at a value of US$ 3.3 billion during January/March (US$ mn) 10, , , , , ,000.0 Net Portfolio Investment in Egypt and Its Main Components Q1 Q2 Q3 Q1 Q2 Q3 2016/ /2018 Net Foreigners' Transactions in Treasury Bills Net Portfolio Investment in Egypt Net Foreigners' Transactions in Bonds External borrowing (medium- and long-term loans and facilities) retreated, unfolding a net disbursement of just US$ 4.8 billion (against US$ 7.3 billion). The net change in other assets and liabilities (the change in banks' net foreign assets and liabilities; the CBE non-reserve foreign assets and liabilities; and the counterpart to some items included in the current account) recorded a net outflow of US$ 8.5 billion (against a net inflow of US$ 3.1 billion). This was due to the fact that the net change in the liabilities of the CBE to the external world reversed to a net external repayment of US$ 3.3 billion during the period under review (from a net disbursement of US$ 7.7 billion).

68 -60-5/3- Foreign Trade In July/March 2017/2018, the volume of Egypt's foreign trade increased by US$ 5.3 billion to US$ 65.6 billion. This came as a result of the rise in both merchandise export proceeds by US$ 2.8 billion to US$ 18.8 billion, and merchandise import payments by US$ 2.5 billion to US$ 46.8 billion. Consequently, the trade deficit declined by US$ million. 5/3/1 - Merchandise Distribution of Exports by Degree of Processing * Merchandise export proceeds (oil and non-oil) grew by 17.6 percent to US$ 18.8 billion during the period under review. This was mainly due to the rise in both non-oil exports by US$ 1.5 billion and oil exports by US$ 1.3 billion. US$ bn Oil & Non-Oil Exports Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015/ / /2018 Oil Exports Non-Oil Exports Hereunder is a detailed review of oil and non-oil export proceeds: First: Oil Export Proceeds (32.0 percent of total exports): In July/March 2017/2018, oil export proceeds rose by 29.2 percent to US$ 6.0 billion. This was owed to the increase in both exports of oil products ** by US$ million to US$ 2.7 billion (thanks to the hike in the exported quantities); and exports of crude oil by US$ million to US$ 3.3 billion (due to the rise in global prices of oil). * Table 5/2 in the Statistical Annex shows the distribution of merchandise exports by degree of processing. * * Including bunker & jet fuel and exports of natural gas.

69 -61- Second: Non-oil Export Proceeds (68.0 percent of total exports): Non-oil export proceeds increased by 12.9 percent to US$ 12.8 billion. This was traceable to the higher exports of finished goods, and raw materials by 16.3 percent each: and semi-finished goods by 5.5 percent. Relative Structure of Non-Oil Exports by Degree of Processing July/March 2017/2018 Other Fuel, Mineral Oils & Products 1.2% Raw Materials 11.0% Finished Goods 62.1% Semi- Finished Goods 25.7% A- Finished Goods Exports of this group increased by US$ 1.1 billion to US$ 7.9 billion, reflecting higher exports of some goods, mainly household electric appliances by US$ million; and phosphate and mineral fertilizers by US$ million. B- Raw Materials Exports of raw materials moved up by US$ million to US$ 1.4 billion, due to higher exports of some goods, mainly fruits (fresh/dried) by US$ 74.7 million and vegetables (fresh/chilled/frozen) by US$ 57.0 million. C- Semi-Finished Goods Exports of semi-finished goods rose by US$ million to US$ 3.3 billion, thanks to the rise in the exports of some goods, mainly ethylenepropylene polymers by US$ million. 5/3/2 - Sectoral Distribution of Exports by Degree of Processing As regards the sectoral breakdown of export proceeds in the reporting period, the private sector acquired the lion's share of these proceeds (69.6 percent), while the shares of the investment and public sectors were confined to 18.2 percent and 12.2 percent, respectively.

70 -62- Sectoral Distribution of Exports (US$ 18.8 billion) The Private Sector US$ 13.1 billion The Investment Sector US$ 3.4 billion The Public Sector US$ 2.3 billion Non-Oil US$ 11.0 billion Main commodities: - Gold - Phosphate or mineral fertilizers Oil US$ 2.1 billion Main commodities: - Crude Oil Non-Oil US$ 1.4 billion Main commodities: - Ethylene propylene polymers - Carpets and other floor coverings Oil US$ 2.0 billion Main commodities: - Oil products Non-Oil US$ million Main commodities: - Gold - Aluminum and articles thereof Oil US$ 1.9 billion Main commodities: - Crude Oil 5/3/3- Merchandise Distribution of Imports by Degree of Use * In the reporting period, merchandise import payments (oil and non-oil) rose by 5.5 percent, scoring US$ 46.8 billion. This came on the back of the rise in non-oil and oil imports by US$ 1.6 billion and US$ million, in order. US$ bn 18.0 Oil & Non-Oil Imports Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015/ / /2018 Non-Oil Imports Oil Imports * Table 5/3 in the Statistical Annex shows the distribution of merchandise import payments by degree of use.

71 -63- Hereunder is a detailed review of oil and non-oil import payments: First: Oil Import Payments (20.1 percent of total imports): Import payments of oil went up in the reporting period by 10.2 percent to US$ 9.4 billion. This rise was driven by the increase in imports of both crude oil by US$ million to US$ 1.9 billion (due to the rise in imported quantities) and oil products ** by US$ million, to US$ 7.5 billion. Second: Non-oil Import Payments (79.9 percent of total imports): Non-oil import payments increased by 4.4 percent to US$ 37.4 billion, mirroring the pickup in imports of intermediate goods by 23.5 percent, and of raw materials by only 0.5 percent. However, imports of consumer goods dropped by 1.6 percent. Relative Structure of Non-Oil Imports by Degree of Use July/March 2017/2018 Consumer Goods 26.0% Undistributed Goods 3.1% Other Fuel, Mineral Oils & Products 1.1% Raw Materials 11.8% Investment Goods 19.0% Intermediate Goods 39.0% A- Intermediate Goods Imports of intermediate goods increased by US$ 2.8 billion to US$ 14.6 billion, on the back of the higher imports of some goods, mainly cast iron by US$ million; as well as wood in the rough and densified wood by US$ million. B- Raw Materials Imports of this group moved up by US$ 21.3 million to US$ 4.4 billion, due to higher imports of some goods, mainly soya beans (not for sowing) by US$ million and maize by US$ 91.6 million. By contrast, imports of wheat declined by US$ million. ** Including bunker & jet fuel and imports of natural gas.

72 C- Investment Goods -64- Imports of investment goods rose slightly by US$ 2.9 million to US$ 7.1 billion, due to the pickup in the imports of some goods, mainly agriculture and orchard machinery and equipment by US$ million, and printing machinery and equipment by US$ million. Meanwhile, imports of communication and telephone sets declined by US$ million, and medical appliances and tools by US$ million. D- Consumer Goods Imports of this group went down by US$ million to only US$ 9.7 billion, due to the following developments: - The decline of durable consumer goods by US$ million to only US$ 2.0 billion, because of lower imports of some goods, mainly, household electric appliances by US$ million; and passenger cars by US$ million. - The increase of non-durable consumer goods by US$ 88.2 million to US$ 7.7 billion, owing to higher imports of some goods, mainly meat and edible offals by US$ million, and textiles by US$ million. 5/3/4- Sectoral Distribution of Imports by Degree of Use As regards the sectoral distribution of imports during the reporting period, the share of the private sector accounted for 60.2 percent of the total. Meanwhile, the shares of the public and investment sectors made up only 32.2 percent and 7.6 percent, in order. Sectoral Distribution of Imports (US$ 46.8 billion) The Private Sector US$ 28.2 billion The Public Sector US$ 15.1 billion The Investment Sector US$ 3.5 billion Non-Oil US$ 27.5 billion Main commodities: - Maize - Cast iron Oil US$ million Main commodities: - Oil products - Crude Oil Non-Oil US$ 6.8 billion Main commodities: - Wheat - Motors and generators - Meat and edible offals Oil US$ 8.3 billion Main commodities: - Oil products - Crude Oil Non-Oil US$ 3.1 billion Main commodities: - Cast iron - Spare parts for machines and appliances Oil US$ million Main commodities: - Crude Oil - Oil products

73 -65-5/3/5 - Foreign Trade by Geographical Distribution * According to the geographical distribution of foreign trade and main trade partners, Egypt's foreign trade (oil and non-oil) with Russian Federation and the Commonwealth of Independent States increased by 29.9 percent, non-arab Asian countries by 14.6 percent, the EU countries by 11.5 percent, non-arab African countries by 11.4 percent, Arab countries by 7.5 percent, other European countries by 5.0 percent, and the USA by 1.5 percent. Meanwhile, Egypt's foreign trade with Australia and other countries & regions declined by 4.4 percent. Volume of Trade by Geographical Distribution July/March 2017/2018 EU 18.9 Arab countries 14.1 Asian countries (excluding Arab countries ) 11.0 Australia & other countries & regions 8.3 Other European countries Russian Federation & C.I.S. USA African countries (excluding Arab countries ) US$ bn At the level of trade partners with Egypt, the UAE was the main trade partner (6.9 percent), followed by China (6.4 percent), the USA (5.5 percent), Saudi Arabia (5.4 percent), Italy (5.1 percent), Germany (4.6 percent), the UK (4.5 percent), Russia (4.2 percent), Switzerland (3.4 percent), and Turkey (3.2 percent). These countries combined constituted 49.2 percent of total volume of foreign trade. Below is a detailed review of Egypt's foreign trade by main economic group in July/March 2017/2018: * Table (5/4) in the Statistical Annex illustrates the geographical distribution of exports and imports.

74 -66- The Geographical Distribution of Oil imports and Exports A- Oil Merchandise Exports Oil exports to the EU countries increased by US$ million, non-arab Asian countries by US$ million, non-arab African countries by US$ million, other European countries by US$ million, the USA by US$ million, other countries & regions by US$ 90.8 million, the Russian Federation and the Commonwealth of Independent States by US$ 17.1 million and Arab countries by US$ 16.0 million. At the level of countries, Italy was the key importer, followed by India, Spain, the USA, Turkey, Malta, Tunisia, and China with a combined share of 57.0 percent of total oil exports. Oil Exports by Main Countries July/March 2017/2018 Others 43.0% Italy 23.5% India 10.7% Spain 5.8% China 2.5% Tunisia 2.9% Malta 3.1% Turkey 3.6% United States of America 4.9% B- Oil Merchandise Imports Oil imports from other countries & regions increased by US$ million, Arab countries by US$ million, the non-arab African countries by US$ 64.6 million, and the non-arab Asian countries by US$ 62.8 million. In the meantime, oil imports from other groups decreased. At the level of countries, Saudi Arabia was the key exporter, followed by Kuwait, Iraq, Qatar, Algeria, UAE, Greece, and Nigeria. These countries combined accounted for 59.9 percent of total oil imports. Oil Imports By Main Countries July/March 2017/2018 Others 40.1% Saudi Arabia 20.6% kuwait 11.4% Nigeria 2.7% Greece 2.8% United Arab Emirates 2.9% Algeria 3.7% Qatar 7.5% Iraq 8.3%

75 -67- The Geographical Distribution of Non-Oil Imports and Exports A- Non- Oil Merchandise Exports The geographical distribution of non-oil export proceeds shows that the Arab countries topped the list, accounting for 32.6 percent of the total, followed by EU countries (30.6 percent), and other European countries (10.5 percent). At the level of countries, the UAE was the key importer, followed by the UK, the USA, Saudi Arabia, Switzerland, Germany, Turkey, Canada, and Italy, with a combined share of 62.8 percent of total non-oil exports. Others 37.2% Non-Oil Exports by Main Countries July/March 2017/2018 United Arab Emirates 14.4% United Kingdom 9.9% Italy 3.8% United States of America 9.1% Canada 4.1% Turkey 4.8% Germany 5.1% Switzerland 5.5% Saudi Arabia 6.1% B- Non-Oil Merchandise Imports The distribution of non-oil import payments reveals that the EU countries ranked first, accounting for 30.1 percent of the total, followed by the non-arab Asian countries (23.8 percent), and Australia and other countries & regions (11.7 percent). At the level of countries, China ranked first as the main exporter, followed by Russia, UAE, Germany, USA, France, Switzerland, UK, and Brazil. All these countries combined made up 50.0 percent of total non-oil imports. Non-Oil Imports by Main Countries July/March 2017/2018 China 10.5% Others 50.0% Russia 6.5% United Arab Emirates 6.3% Brazil 3.5% United Kingdom 4.0% Switzerland 4.0% France 4.1% Germany 6.0% United States of America 5.1%

76 -68-5/3/6 - Foreign Trade by Main Commodity and Merchandise Balances Breakdown of export proceeds by main commodity shows that exports of crude oil and products topped the list, with a share of 32.0 percent of total exports in July/March 2017/2018, followed by foodstuffs (excluding cereals) with 11.9 percent, then chemical products with 11.0 percent. As for import payments, crude oil and products also took the lead, constituting 20.1 percent of total imports, followed by electric machinery, appliances and equipment and parts thereof with a share of 16.5 percent, and foodstuffs (excluding cereals) with 10.4 percent. US$ bn Foreign Trade by Merchandise Groups July/March 2017/ Oil Foodstuffs (Excl.cereals) Cereals & Mill Products Textile Materials & Articles Thereof Chemical Products Electric Machinery, Appliances & Equipment & Parts Thereof Base Metals & Products Vehicles, Cars & Other Means of Transportation Exports Imports Volume of Trade

77 -69-5/4- International Finance Data of international finance for July/March 2017/2018 showed a net inflow of US$ 22.2 billion (against US$ 24.2 billion in the same period of the previous FY) down by US$ 2.0 billion, due to the following developments: (US$ bn) (3) Net International Finance from Abroad July/March 2015/ / /2018 Net Interest Payments and Profit Transfers Total Net Resources from Abroad Net International Finance from Abroad - Resources from abroad (inflows) fell by US$ million, to US$ 26.8 billion (against US$ 27.4 billion), mainly due to a decline in external borrowing and portfolio investment abroad. This was offset by the increase in net portfolio investment in Egypt by US$ 7.1 billion. - Interest payments and profit transfers (outflows) rose by US$ 1.4 billion to US$ 4.6 billion (compared with US$ 3.2 billion). During July/March Net International Finance from Abroad Net International Finance from Abroad (A+B) A- Resources from abroad 1- Official grants (net) 2- External borrowing (net)** 3- FDI in Egypt (net) 4- Portfolio investment in Egypt (net) 5- Direct investment abroad (net) 6- Portfolio investment abroad (net) B- Interest Payments and Profit Transfers 1- Net profit transfers of portfolio investment 2- Net profit transfers of FDI 3- Net interest on deposits 4- Interest on external loans and facilities * Provisional. ** Including deposits of non-residents. 2016/ (147.7) (3229.0) (186.0) (2471.8) (722.6) 2017/2018* (200.0) (25.1) (4620.7) (641.3) (3331.5) (1048.5) (US$ mn) Change +(-) (1981.2) (589.5) 11.0 (6922.1) (545.8) (52.3) (203.8) (1391.7) (455.3) (859.7) (325.9)

78 -70- Hereunder is a detailed review of the main components of international finance. 5/4/1- Foreign Direct Investment (FDI) in Egypt FDI in Egypt registered a net inflow of US$ 6.0 billion in July/March 2017/2018 (against US$ 6.6 billion in the same period of the previous year). The decline mainly reflected the fall in investment flows to Egypt particularly from the European Union as illustrated in the table below: (US$ bn) /2016 Net FDI in Egypt July/March 2016/ /2018 Inflows Net Foreign Direct Investment in Egypt Geographical Distribution of FDI in Egypt (US$ mn) During July/March 2016/ /2018* Change Net Flows of FDI in Egypt (A+B) (545.8) A-Total Inflows (517.8) USA EU Countries (1075.2) Arab Countries Other Countries B-Capital Repatriation 1 (4195.8) (4223.8) (28.0) * Provisional The sectoral distribution of total FDI inflows during the period indicated that the oil sector captured US$ 6.8 billion of the total, while services attracted US$ 1.2 billion, manufacturing US$ 1.0 billion, and construction US$ million. 1 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.

79 -71- FDI in Egypt by Economic Sector July/March 2017/2018 Petroleum 66.3% Construction 4.3% Undistributed 7.3% Agriculture 0.1% Services 11.8% Manufacturing 10.2% Communications 3.9% Real Estate 2.5% Finance 2.1% Other Services 3.3% The breakdown of total FDI inflows in Egypt by investment purpose indicated that the petroleum investments came in the first place, with a share of 66.3 percent. Greenfield investments came next with 30.7 percent, followed by investments resulting from transfers for buying real estates (2.5 percent), and proceeds from selling local entities to non-residents (0.5 percent). (US$ bn) /2016 FDI Inflows by Investment Purpose July/March 2016/ /2018 Greenfield investments Petroleum sector investments Transfers for buying real estates Proceeds from selling local entities to non-residents

80 -72-5/4/2- Portfolio Investment in Egypt Portfolio investment in Egypt recorded a net inflow of US$ 14.9 billion during the period under review (against US$ 7.8 billion in the same period a year earlier). This was due to the pickup in foreigners' investments in Egyptian Treasury bills, resulting as such in net purchases of US$ 11.5 billion (versus US$ 4.3 billion), and a net change of bond holdings in an amount of US$ 3.3 billion. (US$ bn) Portfolio Investment in Egypt July/March 2015/ / /2018 5/4/3- External Official Grants First: Inflows of Actual Grants The inflows of official grants rose by US$ 11.0 million during July/March 2017/2018 (compared with the same period a year earlier). This came as a result of the increase of US$ 38.2 million in total inflows of official grants to US$ million (cash grants registered US$ 72.6 million and commodity grants US$ 86.3 million). Add to this the rise of US$ 27.2 million in official grants transferred abroad to register US$ 65.4 million. The geographical distribution of official grants showed that the USA accounted for the bulk (US$ 70.5 million), followed by China (US$ 19.8 million), then the UK (US$ 19.0 million), Germany (US$ 6.7 million), and Japan (US$ 5.8 million).

81 -73- Geographical Distribution of Official Grants July/March 2017/2018 USA 44.4% Japan 3.7% Other Countries 21.2% France 2.1% China 12.4% UK 12.0% Germany 4.2% Second: New Commitments of Official Grants Data indicated that grant commitments rose by US$ 57.9 million during July/March 2017/2018 (compared with the corresponding period a year earlier), to US$ million. The geographical distribution of these commitments indicated that the European Commission's share was 35.9 percent of the total, followed by the USA (35.7 percent), China (13.5 percent), then other countries (14.9 percent). Official Grants: New Commitments (US$ mn) During July/March 2016/ /2018* Total Commitments, of which: USA EU France Japan Canada China South Korea MENA Transition Fund-WB Kuwait European Commission African Development Bank * Provisional Source: Ministry of Investment and International Cooperation (MIIC)

82 -74- Sectoral distribution of grant commitments during the period under review showed that the services sectors topped the list with US$ million (mostly went to education, health, & scientific research in an amount of US$ million; followed by housing & utilities with US$ million), then productive sectors (US$ 12.3 million), mainly agriculture and irrigation. Sectoral Distribution of Grants July/March 2017/2018 Education, health and scientific research 44.2% Social solidarity 10.3% Others 4.9% Housing and utilities 33.5% General government 3.5% Agriculture & irrigation 3.6% 5/4/4- External Debt External debt reached US$ 88.2 billion, up by US$ 9.1 billion or 11.6 percent at end of March 2018 (compared with the end of June 2017). This reflected a rise in net disbursements of loans and facilities by US$ 7.4 billion, and the appreciation of most currencies of borrowing against the US dollar by US$ 1.7 billion. External debt-service reached US$ 10.9 billion during July/March 2017/2018 (principal repayments made up US$ 9.2 billion and interest payments US$ 1.7 billion). A- External Debt Structure The data on external debt by original maturity indicated that medium- and long-term debts (guaranteed and non-guaranteed) registered US$ 76.7 billion at end of March 2018 or 87.0 percent of total external debt. In figures, long-term debt made up US$ 62.7 billion (mostly owed to international and regional organizations and deposits from non-residents), and medium-term debt US$ 14.0 billion. In the meantime, short-term debt stood at US$ 11.5 billion or 13.0 percent of total external debt.

83 -75- External Debt Structure by Original Maturity End of March 2018 Short-term debt 13.0% Medium-term debt 15.9% Long-term debt 71.1% Below are the main components of external debt: First: Medium- and Long-Term External Debt - Bilateral rescheduled loans registered US$ 3.9 billion at end of March 2018 (against US$ 4.3 billion at end of June 2017). In the meantime, other bilateral loans * recorded US$ 7.7 billion against US$ 6.6 billion. - Suppliers & buyers credit stood at US$ 7.9 billion, up by 21.2 percent compared with the end of June Debt of international and regional organizations recorded US$ 27.0 billion, with an increase of US$ 5.3 billion or 24.2 percent compared with the end of June The balance of Egyptian bonds and notes floated abroad (held by nonresidents) stood at US$ 12.2 billion or 13.8 percent of total external debt, up by US$ 3.2 billion compared with end of June The increase mainly reflected the following developments: The issuance of Eurobonds in an amount of US$ 3.8 billion in February The decline in the net balance of bonds held by foreigners by US$ 0.6 billion due to purchases of these bonds by residents. - Long-term deposits of non-residents (representing the Arab countries deposits at the CBE) reached US$ 17.6 billion at end of March 2018 or 20.0 percent of total external debt. - Non-guaranteed debts of the private sector recorded US$ million (or 0.5 percent of total external debt). Including the liquidity support facility provided by China Development Bank to the Central Bank of Egypt.

84 -76- Medium -and Long-Term External Debt Structure End of March 2018 Rescheduled bilateral debt 5.1% Suppliers' & buyers' credit 10.3% Private sector debt (nonguaranteed) 0.5% International & regional organizations 35.2% Long-term deposits 23.0% Other bilateral debt 10.0% Bonds and notes 15.9% Second: Short-Term External Debt Short-term external debt reached US$ 11.5 billion at end of March 2018 (compared with US$ 12.3 billion at end of June 2017). The decline mainly reflected the retreat in short-term trade credit and cash loans by US$ 0.9 billion to US$ 7.6 billion; and the increase in short-term deposits of non-residents by US$ 0.1 billion to US$ 3.9 billion. Short-term external debt as a percentage of NIRs registered 27.0 percent against 44.2 percent in March 2017, reflecting the decline in short-term external debt by 8.7 percent and the increase in international reserves by 49.4 percent. (US$ bn) Short-Term External Debt Structure at End of March 2017 June 2017 March 2018 Deposits Loans and facilities

85 -77- B- External Debt by Debtor Data of external debt by debtor at end of March 2018 indicated the following: - Debt owed by the central and local government rose by US$ 8.9 billion to US$ 43.8 billion (49.6 percent of total external debt). - Debt owed by banks and other sectors also rose by US$ 1.2 billion and US$ 2.0 billion, respectively, to US$ 5.3 billion and US$ 11.8 billion. - Debt owed by the monetary authority fell by US$ 3.0 billion to US$ 27.3 billion, due to the repayment of deposits of the African Export-Import Bank and the redemption of one Repo operation during October/December % External Debt by Debtor End of March 2017 June 2017 March Central & Local Government Monetary Authority Banks Other Sectors C-External Debt by Creditor Data of external debt by creditor at end of March 2018 indicated the following: US$ 27.0 billion were owed to international and regional organizations, US$ 22.6 billion to Arab countries, mainly Saudi Arabia (9.5 percent), UAE (9.2 percent), and Kuwait (5.8 percent). Add to this foreigners holdings of Egyptian bonds and notes floated abroad in an amount of US$ 12.2 billion. In the meantime, US$ 14.5 billion were owed to five Paris Club members, namely Germany (8.6 percent), Japan (2.6 percent), France (2.3 percent), the USA (1.6 percent), and the UK (1.3 percent). Furthermore, debt owed to China reached US$ 5.1 billion or 5.9 percent of total external debt.