Hussein Abaza
Egypt was one of the bright spots when it came to economic growth in 2020 — while much of the world experienced a decline in economic output as a result of the ongoing coronavirus pandemic, Egypt recorded a reported 1.5% growth rate and was able to avoid fully locking down its economy.
The country also continued to build on its fiscal reform programme, launched in 2016, with the banking sector playing a prominent role in funding the economy. New banking sector regulations, passed in 2020, are also expected to spur on the sector, notably when it comes to the adoption of digital banking services.
Many are hoping that 2021 will be another important year for the banking sector, and for banks like Commercial International Bank (CIB) — one of the largest private banks operating in Egypt and the country’s biggest listed bank.
However, 2020 was a turbulent one for CIB, which was forced to replace its long-time chairman and managing director, Hisham Ezz Al-Arab, after the Central Bank of Egypt ordered his discharge following compliance concerns. The bank also saw a drop in net profits, reporting consolidated net profits of E£10.23bn ($650m) in 2020, excluding minority shareholders’ rights, down 13.24% year-on-year.
Even so, the bank remains an important player in the domestic market, with assets worth approximated $25bn.
Hussein Abaza has been chief executive of CIB since 2017 and sits on the bank’s board of directors. He shares his thoughts on some of the significant developments of 2020, as well as his outlook for the year ahead.
Q: Egypt is one of the few countries that saw positive economic growth in 2020. Why was that, and how does growth look for 2021?
A: With Egypt witnessing positive growth rates in 2020, the economy’s growth slowdown has been less severe than expected in the face of the pandemic and subsequent disruption to economic activity.
In response to the pandemic, Egyptian authorities took strategic, proactive measures to address health and social needs, and to support the sectors most affected by the crisis, which helped manage the economic impact. External market conditions have also improved, with a strong return of portfolio inflows.
Fintech flourished in Egypt this year, so we can expect significant growth moving forward.
While Egypt’s economy has benefitted from the lower price of hydrocarbons in 2020, tourism is one of the country’s most important sources of foreign currency and will likely rebound slower than other sectors due to the global pandemic. With this in mind, we can predict that the economy’s true rebound is likely to gain momentum in 2022.
Q: Has Egypt been able to continue its efforts on fiscal structural reforms, despite the challenging year?
A: According to the International Monetary Fund (IMF), Egypt’s budget execution is on track to achieve the programme target for fiscal year 2020/21, but continued progress on fiscal-structural reforms is critical to ensure additional space for high priority spending on health, education and social protection. The authorities have remained, and continue to remain, committed to a focused set of structural reforms, supported by the IMF’s Extended Fund Facility to generate private-sector-led growth and job creation.
Q: How did the Egyptian banking sector perform in 2020? Are there any aspects to be particularly pleased or concerned with?
A: Egypt’s banking sector proved to be one of the region’s most resilient in 2020, particularly due to the country’s IMF-backed, broad-based structural reforms in the years leading up to the pandemic.
When the pandemic hit, the sector was highly capitalised thanks to supranational and international organisations, and timely central bank initiatives. With a well-capitalised banking sector established before the pandemic, the sector was able to prevent many unfavourable financial crises.
Q: How have digital banking and fintech matured in Egypt over the past few years?
A: Fintech flourished in Egypt this year, so we can expect significant growth moving forward. Digital financial services have been rapidly expanding as well, with regulatory frameworks rolled out for digital banks and fintech, along with regulations for e-payments and cryptocurrency.
An important development is the rollout of the national prepaid Meeza card that allows Egyptians to pay all government fees digitally via ATMs, point-of-sale machines and e-commerce websites. It is an important step towards greater financial inclusion in a country where two-thirds of the population remain unbanked.
The passing of the Banking and Central Bank Act in 2020 provides a regulatory framework for the operation of digital payments, banks and currencies, providing more certainty as the industry grows. Banks now have one to three years to comply with the new provisions.
