The Central Bank of Egypt (CBE) said, in an official statement, that the issuance for banknotes rose by EGP 56.7bn, during the 2012/2013 fiscal year (FY) to register a total of EGP 264.1bn.
EGP 10.1bn were issued in January 2013 while EGP 18.1bn were issued in June 2013, according to the bank.
CBE noted that government expenditure, which reached EGP 588.2bn during the 2012/2013 FY, led to an increase in the budget deficit which registered EGP 239.7bn, comprising 13.7% of GDP.
“Without a doubt, this resulted in an increased demand on banknotes for circulation, especially if this expenditure is used to increase wages, pensions and [financial] compensations that the government pays for individuals,” the CBE statement read.
The bank defended its banknote issuing policies, stating that it has abided by economic standards, such as the Real Gross Domestic Production (GDP) and inflation rates. CBE added that it follows the legal standards required for printing banknotes.
The official statement pointed out that during the past three years, the issuance of banknotes has increased during three main periods, the first of which was in February 2011, when the issuance of banknotes surged by EGP 21.9bn.
CBE attributed the increase to the rising demand following the shutting down of banks and ATM machines.
The second event occurred in January 2013, with the issuance of bank notes increasing by EGP 10.1bn, due to fears of political escalations on the anniversary of the January 2011 uprising.
“The third was in June 2013, where the banknote issuance rose by EGP18.1bn,” the bank said, adding that “this was to meet the citizens’ demands for banknotes and to face seasonal expenditures”.
The bank pointed out that in December 2013, total banknotes issued reached EGP 268.4, an EGP 4.3bn increase in the period between July and December.
Several days ago, Al-Jazeera reported that former prime minister Aly Lotfy criticised the central bank for committing “the heinous crime against the economy by printing EGP 22bn banknotes in January.”
CBE Governor Hisham Ramez could not be reached for comment.