Private sector’s share declined to 45.8% of total banks’ loans, the banking sector is committed to find new solutions

The private sector plays a pivotal role in driving Egypt's economy, contributing mainly to the promotion of growth, production and operating indicators, making it a key partner of Egypt in achieving economic development and ensuring its sustainability.

Despite this importance, the economic challenges of recent years, it has affected the private sector's ability to expand as a result of many obstacles, including its ability to access financing at an appropriate cost. This is due to a significant rise in interest rates driven by the central bank's shrinking monetary policy in the recent period, with interest rates on lending currently reaching 28.25%.

The option of contractionary monetary policy was a compulsory for the Central Bank of Egypt like other monetary authorities around the world during the previous period due to high inflation rates around the world, including the Egyptian market in which inflation rose to record levels, with highs of 41% in June 2023.

Although monetary policy has succeeded in restricting the growth and escalation of inflation and pushing a downward trajectory, the significant rise in interest rates has had a negative impact on private sector lending rates over the past period, as confirmed by the private sector's share of total banking loans falling from 61.9% in June 2020 to 45.8% in May 2024.

The size of the private sector loan portfolio was 2.15 trillion pounds by the end of May 2024. These loans directly contributed to enhancing the private sector's contribution to GDP, which recorded 77.3% by the end of 2023, according to the latest data from the Central Bank of Egypt.

Despite the significant contribution of the private sector to GDP, the government is seeking to strengthen this proportion to rise above the 85% level in the coming period, and the facilitative monetary policy expected to be pursued by the Central Bank over the next period is expected to enhance the private sector's ability to reach this proportion.

Apart from the expansionary or facilitative monetary policy of the Central Bank, which is expected to take a relatively long time to push lending interest rates to appropriate levels, Egypt and the banking sector demand that urgent solutions be put in place to strengthen their loans to the private sector to ensure that it continues to operate, expand the Egyptian market and achieve Egypt's growth, production and employment objectives.