Skip to content
March 23rd, 2016

Reforming the Central Bank in Egypt

In the early 2000s, the Egyptian economy was in poor shape, plagued by bad debts and shifts in policy. The government decided to follow the international trend of making its central bank independent. By 2009 the results of the reforms were apparent, as the central bank commanded authority over the Egyptian banking with credible national and international policies. This enabled it to weather the financial crisis of 2007-08.

The initiative

In the early 2000s, political will for change grew within the ruling National Democratic Party (NDP). In June 2003, the Unified Banking Law paved the way for revitalising the central bank.

To implement this law's mandate and oversee sweeping banking sector reforms, Farouk El Okdah became CBE governor in late 2003. El Okdah realised that the CBE had to be overhauled before it could begin the job of cleaning up the banking sector. El Okdah and his team restructured the CBE, aggressively recruiting private sector talent by amending the Unified Banking Law to permit higher salaries, instituting performance-based promotion, expanding training programmes and strengthening IT systems.

The broad-based financial sector reform programme was supported by several international financial institutions, the World Bank, the US Agency for International Development, the European Central Bank and the International Monetary Foundation (IMF), through development policy loans and technical assistance.

By 2009, the results of this institution-building were apparent. The CBE commanded authority in the Egyptian banking sector, engaged in independent open market operations, and formulated credible monetary and foreign exchange policies. The bank's structural changes enabled the successful management of a banking reform, which in turn helped the Egyptian economy survive the global financial crisis. The CBE's contribution included:

  • Improving the management of the exchange rate -the Egyptian pound was floated in 2003-04 and a necessary depreciation ensued.
  • Reducing import tariffs to an average 6.9% (this put Egypt at the lower end of the international trade tariff scale).
  • Improving budget management and control (e.g., the introduction of a single treasury account).
  • Restructuring the financial sector, to make it independent of the Egyptian state.

Enhancement of the overall business environment.

The challenge

Before 2003, the Central Bank of Egypt (CBE) had little control over monetary and foreign exchange conditions. There were high levels of bad debt in the banking sector, and erratic government policies had undermined economic growth. The lack of an independent supervisory authority only added to the problems in the Egyptian economy.

The public impact

In 2010, Egypt was among the world's 10 most active reformers for the fourth time according to the World Bank's 2010 “Doing Business” rankings. The country moved up 10 places to 106 among 183 economies worldwide for the overall ease of doing business. The economic growth of the first decade of the 21st century improved outcomes and living standards of the vast majority of the population, although in an uneven manner, and the Egyptian economy remained surprisingly resilient during the 2007-08 financial crisis.

However, a major question about the CBE was how it would respond to the Egyptian Revolution of early 2011 and the subsequent fallout. There were questions raised about the CBE's approach to its foreign exchange problems, for example, and the artificially high level of the currency. In 2015 the Carnegie Endowment for International Peace said: “low global import prices give the new governor of Egypt's Central Bank an opportunity to depreciate the value of the Egyptian pound and resolve Egypt's foreign currency shortage.” [1] Questions remain, although, as reported in the Daily Telegraph in March 2016: “The Central Bank of Egypt (CBE) said that it had devalued the Egyptian pound to 8.85 against the US dollar at a special foreign exchange auction.” [2]

Stakeholder engagement

There was a concerted  engagement of economists, politicians and employees and NGOs such as World Bank and the IMF in reforming the CBE:

  • The NDP Economic Policies Committee was chaired by Mahmoud Mohieldin, who later served on the CBE's board of directors and as minister of investment.
  • In drafting the banking legislation, the committee took input from domestic and international economists on maximising the CBE's authority and independence in decision-making while compromising with the peculiarities of the Egyptian political context - specifically, the power of the then president and Cabinet.
  • The broad-based financial sector reform programme was managed by El Okdah, Mohieldin and Boutros Ghali, and they were supported by the World Bank, the ECB, the IMF and other international financial institutions.

Political commitment

The reform process was supported by the ruling government in Egypt. The involvement of the then president's son in this process, along with economists and former bankers, clearly showed the interest of the ruling party in this reform. However, since this was a reform introduced during Mubarak's dictatorship, its stability is under question.

Public confidence

People were unhappy with the government’s measures of the government to support the economy, and citizen discontent grew as the economy deteriorated. Because of this, and the subsequent Egyptian Revolution of 2011 during the Arab Spring, public confidence must be considered as very weak.

Clarity of objectives

The objectives of the bank reforms were clear and came with measurable targets:

  • Under the Unified Banking Law, the governor of the CBE reported directly to the Egyptian president.
  • The law made clear the CBE's objectives and strengthened its ability to implement them

    • to devise and enforce monetary and foreign exchange policy
    • to supervise the banking sector
    • to preserve the stability of the financial system.

Strength of evidence

The Economic Policies Committee researched the operations of several other central banks, such as the ECB, the Banque de France, and the US Federal Reserve, and also took evidence from a range of senior economists.


During the drafting phase of the legislation, the committee looked into financial, technological and HR concerns and added mechanisms to resolve them. To start with, El Okdah and his board of directors conducted a baseline assessment to sort out goals and priorities. Then he and his team studied existing regulatory and monetary policies and looked at staff capacity, salary structures and IT systems.


The new management of the CBE was well versed in delivery and their roles and responsibilities were clearly defined. Each member of senior CBE management had specific responsibilities: El Okdah for banking sector reforms, Mohieldin for non-bank financial reforms, and Boutros Ghali for fiscal reforms.

El Okdah rebuilt and empower the CBE in order deliver on reforming service delivery in the banking sector. After working in Egypt's National Bank he was familiar with the inefficiencies confronting the Egyptian banking sector, especially the poor credit policies of large public banks. He also understood international practices, thanks to his experience at the Bank of New York.

The approach to management was summed up by Mohieldin, the main drafter of the Unified Banking Law: “The issue of implementation was very much understood by the new central bank management. They knew very well that it is not just about laws. The world moves ahead. They needed to empower the central bank. … Only with the capacity to lead, do things get done efficiently.” [3]


The effect of the reforms were measured on the basis of non-performing Assets (NPAs) in the banking sector, foreign exchange reserves, and stability of the exchange rate:

  • Approximately 90% of total nonperforming loans (excluding the debts of public sector businesses) had been eliminated by 2008.
  • The Egyptian economy remained surprisingly resilient during this period, thanks in part to the CBE's policy measures.


Assistance from IMF and World Bank helped to streamline the process of reforming the CBE.

The CBE had first of all to fill key gaps within its own structure. The governor, El Okdah, and the board of directors created several new departments meet the specific needs of banking sector reform. The three new units were each advised by different financial NGOs: monetary policy (the IMF), banking supervision (the ECB and the World Bank), and non-performing loans (the World Bank).

Each of the three received initial technical help from different international financial NGOs: the monetary policy unit from the IMF, the banking supervision unit from the World Bank and the European Central Bank, and the nonperforming loans unit from the World Bank.

The result was that the CBE was well aligned externally and internally: “today, if you go to the central bank, you wouldn't really recognise who is new and who is old,” Mohieldin said in 2010. “All the people are marching in the same direction.” [4]

The Public Impact Fundamentals - A framework for successful policy

This case study has been assessed using the Public Impact Fundamentals, a simple framework and practical tool to help you assess your public policies and ensure the three fundamentals - Legitimacy, Policy and Action are embedded in them.

Learn more about the Fundamentals and how you can use them to access your own policies and initiatives.

Explore the Fundamentals