Egypt achieves low overall compliance with international standards and codes, with a score of 30.8 out of 100 in our Standards Compliance Index. Egypt's compliance in all three broad categories -- macroeconomic fundamentals, market infrastructure and financial supervision -- is low, with only data dissemination coming close to international standards. Egypt's legislative framework in the areas of fiscal transparency and banking supervision appears adequate, and a new Code of Corporate Governance was published in October 2005, supplementing existing laws. However, implementation remains weak or untested. Egypt has declared its intent to bring its payment systems and anti-money laundering framework in line with international best practices. However its accounting and auditing practices are not compliant with global standards. Despite positive feedback, there are no publicly available assessments of Egypt's compliance in the areas of insolvency framework, securities regulation, and insurance supervision.

Macroeconomic Policy and Data Transparency

Egypt has been a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) since 2005. According to a 2006 report by the IMF, the economic and financial statistics provided by Egypt to the IMF's Dissemination Standards Bulletin Board (DSBB) are adequate for surveillance purposes. The information on the IMF's DSBB indicates that Egypt meets with the SDDS requirements for coverage, timeliness, and periodicity for all but four categories, and data in most cases have advance release calendars and are simultaneously released to all interested parties. Among the shortcomings identified in Egypt's statistics on the DSBB is that advance notice of methodological changes is not given as per IMF SDDS requirements and the Ministry of Finance has not published documentation on methodology and sources used in preparing fiscal statistics. More »

Oxford Analytica's (OA) 2006 Report on Monetary Policy Transparency in Egypt, ranked Egypt's overall compliance with this standard as "Intent Declared." Egypt continues to make gradual progress in improving monetary policy transparency. One important step in this regard was Egypt's 2005 subscription to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS). However, there remain deficiencies in Egypt's reporting of certain monetary data, particularly with regard to timeliness and periodicity. Egypt remains committed to reform; restructuring and consolidation within the banking sector; and improvements in the CBE's structural and staffing resources. The CBE's recently constituted Monetary Policy Committee (MPC) is developing an inflation-targeting framework that it hopes to have in place by late 2007. One early contribution of the MPC to enhanced monetary policy transparency has been the introduction, in 2005, of its Monetary Policy Statement, in which policy objectives, the framework and instruments used, and the decision-making process are explained to the public. This statement and subsequent amendments appears on the CBE website, where the public has access as well to the CBE's major monetary-policy publications, its annual reports, and a variety of other relevant information. In the future, possibly at the implementation of the medium-term inflation targeting framework, the MPC plans to release the minutes of its meetings and its voting records. More »

The 2006 report on Fiscal Policy Transparency produced by Oxford Analytica (OA) rated Egypt's overall compliance with this standard as "Enacted." Since 2002, Egypt has undertaken significant reforms that have had a positive impact on both the content of its fiscal policy and the quality of fiscal transparency, and the pace of these reforms has increased since 2004. Egypt has brought its budget classification into compliance with the International Monetary Fund's (IMF) 2001 Government Financial Statistics Manual (GFSM) and has created a macro-fiscal unit within the Ministry of Finance (MoF) charged with the development of a medium-term budget framework and producing risk and sustainability analyses. These were previously lacking. Modernization of the budget process through the implementation of an "e-governance" project has moved forward, as well, and tax reforms have been introduced that have simplified and enhanced collections and made greater dissemination of tax information to the broader public possible. A major improvement in transparency was achieved with the establishment of a single, consolidated government treasury account at the Central Bank, resulting in the closing of approximately 42,000 individual agency accounts. Finally, progress continues in the privatization of State Owned Enterprises and the restructuring of public agencies, although difficulties have been encountered as the process turns toward the privatization of "politically sensitive" industries. In 2005, Egypt became a subscriber to the IMF's Special Data Dissemination Standard (SDDS), but improvements remain necessary in the quality and timeliness of its fiscal data. More »

Institutional and market infrastructure

Bankruptcy and preventive reorganization issues in Egypt are regulated by Title 5 of the Commercial Code (Law No. 17 of 1999). The Code went into effect on October 1, 1999 and superseded the old Commercial Code of 1883. According to the "Doing Business Indicators" published by the World Bank, closing a business in Egypt is a lengthy and costly process. Out of 175 countries surveyed, Egypt ranked 125th. However, there insufficient information publicly available regarding Egypt's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

In 2002, the World Bank conducted an assessment of accounting and auditing practices in Egypt in order to evaluate the weaknesses and strengths of the Egyptian accounting and auditing requirements, and to review the reporting requirements against actual practices. International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) were used as the benchmarks for assessing national standards. It was concluded that significant progress has been made in eliminating differences between Egyptian Accounting Standards (EASs) and IFRSs (at the time of the assessment designated as International Accounting Standards - IASs, later renamed as IFRSs). As of 2002, the EASs in general were developed in accordance with IFRSs except for accounting for leases. Since then the International Accounting Standards Board (IASB) has substantially changed the body of IFRSs and there is no indication that the changes have been incorporated into Egyptian accounting requirements. In its 2002 assessment the World bank also commented on the insufficient knowledge about IFRSs, lack of implementation guidelines, and weak enforcement that lead to the overall low quality of financial reporting. It was recommended to work out an accounting reform plan taking into consideration inputs provided by the World Bank's assessment. More »

The Egyptian corporate legal framework has its origins in French civil law. Law No.159 of 1981 provides the basic company law. Anglo-American common law concepts are more prominent in the Capital Market and Central Depository Laws. In 2004, the World Bank published a Report on the Observance of Standards and Codes (ROSC) on Corporate Governance in Egypt. The main conclusion of the report was that while there have been a number of major reforms undertaken in the recent past, mostly incorporated in the July 2002 reform of listing rules, the implementation and enforcement of the rules remain weak. In this regard, the report recommends that there is need to build institutional capacity in order to ensure effective regulation of the market and strong enforcement of rules; and to implement legal reform in order to bring the policy reform into greater conformity with the Organization for Economic Co-operation and Development (OECD) Principles. The Egyptian Code of Corporate Governance was published in October 2005 by the Egyptian Institute of Directors and should be considered an addition to the corporate-related provisions stated under various laws. It is currently under review. More »

The 2002 World Bank assessment of accounting and auditing practices in Egypt concluded that significant progress has been made in eliminating differences between Egyptian Standards on Auditing (ESAs) and Internationals Standards on Auditing (ISAs). Auditors are required to follow six ESAs which, according to the World Bank, cover only reporting requirements and are silent on other issues. However, in the absence of the local standard, ISAs must be used. The World Bank noted, however, that the compliance with existing requirements is weak, and that consultations with auditing practitioners and other market participants revealed that, overall, the quality of audits in Egypt is perceived to be low by the "investor community." Moreover, the audit profession and its oversight raised concerns. The World Bank identified weaknesses in the auditing framework in Egypt and proposed an action plan for the accountancy reform. The proposed amendments to Accounting Practice Law No. 133/1951 were expected to address some of the shortcomings identified in the World Bank assessment. More »

The United Nations Office of Drugs and Crimes (UNODC) in its 2005 country profile report states that the laws governing Anti-Money Laundering (AML) in Egypt are the AML Law No. 80 of 2002 (amended in 2003), and the Central Bank Law No. 88 of 2003. The report further indicates that the Financial Action Task Force (FATF) removed Egypt from its non-cooperating countries or territories list in 2004 owing to Egypt's continued efforts toward developing an effective AML and terrorist financing regime which the authorities indicated will incorporate the FATF recommendations. According to a 2007 U.S. Department of State (DoS) report, the AML Law clearly defines the predicate crimes associated with money laundering. However, it does not specifically address the rules on confiscation and seizure of assets derived from money laundering. The report further notes that confiscation rules are addressed in the Penal Code, which allows for seizure of assets related to predicate crimes, including terrorism, and that Egyptian authorities intend to update its old counterterrorism law with a new one which would include more specific measures against terrorist financing. The 2005 UNODC report describes Egypt as not being a regional financial center or an offshore financial sector and asserts that the Central Bank of Egypt and other financial regulatory bodies have been actively involved in issuing regulations related to "Know Your Customer" and "Suspicious Transaction" reporting requirements. Egypt is a founding member of the Middle East and North Africa Financial Action Task Force and has ratified the United Nations Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism. In spite of the above information, there is no comprehensive assessment publicly available that addresses Egypt's compliance with the FATF's recommendations. More »

Based on information provided on Egypt on the FIRST Initiative website, there are three payment systems in the country, namely: (1) the High Value Gross Settlement System (FinCopy); (2) the Automated Clearing House System (ACH); and (3) the Government T-Bills Registry System. According to a 2004 World Bank report, the Check Clearing system and the Gross Settlement system - both owned and operated by the Central Bank of Egypt (CBE) - largely complies with the Committee on Payment and Settlement Systems Core Principles for Systemically Important Payment Systems (CPSIPS). However, besides this statement from the World Bank report, there is little information relating to Egypt's compliance with the CPSIPS; moreover, Egypt is in the process of reforming its Payment Systems and has sought the assistance of the World Bank and International Monetary Fund in this regard. According to a 2003 CBE report, as part of the authorities' financial modernization process the authorities intend to bring the Egyptian Payment System in line with the CPSIPS. In this regard a Central Bank Law that clarifies the roles and responsibilities of the CBE in owning, operating, and overseeing the payment system has been enacted, and a payment system department within CBE has been established. Furthermore, according to the CBE's 2006 Annual Report, a legal framework for the National Payment System (which will include the establishment of a Real Time Gross Settlement system) that will be in line with international practices is currently being established and is expected to be completed by the end of 2007. More »

Financial Regulation and Supervision

The International Monetary Fund (IMF), in its 2006 Article IV Consultation report of Egypt states that Egyptian authorities continue to make efforts to bring banking supervision in Egypt in line with international best practices. A 2004 report by the IMF indicated that Egyptian legislation concerning banking supervision largely complies with Basel Core Principles. Furthermore the 2006 Global Survey by the Institute of International Bankers (IIB) notes that the government of Egypt in 2006 continued to pursue the Banking Sector Restructuring Plan for which the country receives assistance from the European Central Bank. According to a 2006 report by Oxford Analytica, the Central Bank of Egypt is the agency responsible for framing policy related to banking and supervising the banking system. The Law on the Central Bank, Banking Sector, and Monetary System (also called the Unified Banking Law) of 2003 defines the CBE's role and responsibilities. The 2006 IMF report notes that banking sector indicators such as capital adequacy ratios have been increasing and nonperforming loans (NPLs) have begun declining. However, there is insufficient information publicly available as to Egypt's compliance with each Basel Core Principle. More »

Egypt's securities markets are in different stages of development. While the stock market is active, albeit with a high market concentration in the top stocks, the secondary market for government bonds and other debt instruments remains underdeveloped. However, many reforms have been implemented over recent years. The market is regulated by the Capital Markets Authority (CMA). The Cairo and Alexandria Stock Exchange (CASE) is a quasi-governmental body under the supervision of CMA. CASE is responsible for monitoring compliance with listing rules and may impose penalties on companies that do not meet disclosure requirements. Regarding Egypt's compliance with the Principles of Effective Securities Regulation developed by the International Organization of Securities Commissions (IOSCO), publicly available information indicates that Egypt is advancing in adopting international best practices, however, none of the sources provides more specific information. More »

In December 2002, the World Bank and the International Monetary Fund (IMF) completed the Financial Sector Assessment Program (FSAP) of Egypt. The final report is not publicly available. However, a number of publications refer to the assessment, and state that Egypt's overall compliance with the international standards in different sectors of economy was positive. A 2006 report by the IMF also noted that the Egyptian authorities aim to make insurance supervision compatible with international standards and that they requested an FSAP update in 2007 to evaluate the results of ongoing reform of the financial sector. The 2007 Country Strategy Report prepared by the African Development Bank (AFDB) pointed out that the reform effort of the Government of Egypt (GoE) for the financial system have been successful. Nevertheless, important shortcomings still remain. Realizing the need to continue the reforms, in September 2004, the GoE launched the Financial Sector Reform Program (FSRP), which entails reforms in the banking sector, non-bank financial institutions, including the insurance sector; as well as strengthening enforcement capabilities of the regulatory bodies. The AFDB approved in July 2006 a loan of US$500 million for the realization of the program. However, the sources of assessment do not directly address the issue of Egypt's compliance with Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). More »

Legend:

Credit Ratings

Moody's Ba1/Stable

Fitch BB+/Positive

Standard & Poor's BB+/Stable

Macroeconomic Data

2007 GDP (Current Prices): 127.9 billion USD (IMF)

2007 GDP (Per Capita): 1,739 USD (IMF)

2008 GDP (Growth Forecast): 7% (IMF)

2008 Inflation (CPI): 8.8% (IMF)

2007 Unemployment: 10.1% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 10 billion USD (UNCTAD)

FDI (Outward): 0.15 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 873 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)