HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

After a period of sociopolitical and economic instability, Egypt’s economic prospects have improved over the past few years. GDP growth stood at 4.3 per cent in 2015/16 and 4.2 per cent in 2016/17 (up from an average of only 2 per cent during 2010/11-2013/14). GDP grew 5.2 per cent and 5.3 per cent in Q1 and Q2 2017/18 respectively. A key contributor to the country’s economic recovery is a rebound in its tourism sector. In 2017, the tourism sector’s contribution to GDP grew by 72.9 per cent compared to 2016, generating USD21.1 billion of GDP (11 per cent of total GDP compared to 7.2 per cent of GDP in 2016). The strengthening economy has had a positive effect on the country’s finances: the current account deficit fell to USD15.6 billion in FY 2016/17 from USD19.8 billion a year earlier. In the first half of fiscal year 2017/18 Egypt's current account deficit contracted by 64 per cent year-on-year driven by a further rebound in tourism receipts and remittances from Egyptians working abroad. Net travel receipts totalled USD3.8 billion, compared with USD157.4 million in H1 2016/17. Net current remittances increased to USD13.1 billion, up from USD10.1 billion in H1 2016/17. In December 2017, Egypt and the World Bank signed a USD1.15 billion loan to boost the economy and create jobs. The agreement was the last of three annual Fiscal Consolidation, Sustainable Energy, and Competitiveness Development Policy Financing loans for a total of USD3.15 billion. Despite the government implementing a reforms programme aimed at spurring the economy, social conditions remain a concern: inflation caused by the currency floatation in November 2016 and energy subsidy reform, for example, have affected both the lower and middle class sections of society. Unemployment too continues to be high (11.3 per cent as of December 2017), with rates higher among the youth and women.

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Legal and regulatory

  • Foreign exchange accounts can be held by residents both domestically and abroad. Resident domestic currency (EGP) accounts cannot be held abroad, but are freely convertible into foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are freely convertible into foreign currency. Foreign exchange accounts (free accounts) may be credited and debited with foreign currency payments between accounts held abroad, and may be used to make payments within Egypt
  • Egypt is a member of the COMESA regional trade zone. A Regional Payment and Settlement System (REPSS) facilitates cross-border payments and settlement between central banks in the COMESA area. REPSS processes payments in EUR or USD
  • Egypt has abolished most exchange controls. In June and November 2017 respectively, Egypt’s central bank announced the cancellation of the USD100,000 limit on individuals’ transfers abroad and the USD50,000 monthly deposit cap on non-priority imports

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Taxation

  • Resident companies are taxed on worldwide income
  • Non-resident companies are taxed on Egyptian-sourced income only
  • The flat rate of corporate income tax is 22.5 per cent, with the exception of oil and gas companies which are taxed at 40.55 per cent
  • Dividends paid to a resident or a non-resident entity are subject to a 10 per cent withholding tax

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Payment instruments and systems

  • Cash is the most important payment medium in Egypt, particularly for low-value retail and commercial transactions. In January 2017, the central bank established the National Council for Payments with the goal of transforming Egypt into a cashless society. Cheques are the dominant cashless payment instrument. Card use is limited in Egypt. Government Payroll cards enable government and public sector employees to collect their salaries and pensions via ATM terminals
  • Egypt operates three national payment systems: an RTGS system; the CCH for cheque payments; and the EG-ACH for electronic credits and debits

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Cash management

  • Domestic and cross-border notional pooling and cash concentration is permitted between resident and non-resident companies
  • Cash and cheque collection services are available

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Electronic banking

  • Electronic banking is available in Egypt. There is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes. Mobile banking transactions are limited to EGP3,000 limit
  • The CBE has authorised Egypt Banks Company to build and operate a mobile payment interbank and clearing service, the Mobile Interbank Switch

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To read the full report on Egypt and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

 

Sources:

  • World Travel & Tourism Council’s (WTTC) Travel and Tourism Economic Impact 2018 Egypt
  • Central Agency for Public Mobilization and Statistics (CAPMAS)
  • International Monetary Fund
  • World Bank
  • Central Bank of Egypt

The materials contained on this page were assembled in May 2017 (unless otherwise dated).

 

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