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Developments of Note Issue

Historical Review :1834-2004

Since the beginning of the circulation of silver and gold coins in Egypt and until 1834, no specified monetary unit existed to serve as a basis for the monetary system in Egypt. Only a few of the coins were minted locally. In 1834, a Decree was promulgated providing for issuing an Egyptian currency based on a bimetallic base. By virtue of this Decree the minting of coins in the form of gold and silver riyals was monopolized by the government. In 1836 the Egyptian pound was minted and put into circulation.

Because Egyptian mints were insufficient to satisfy the requirements of large transactions as well as foreign trade, and because of the use of foreign coins for this purpose, legal exchange rates were fixed by force of law for important foreign currencies which became acceptable in the settlement of internal transactions. Fluctuations in the value of silver in addition to the adoption of the gold standard by most of the countries trading with Egypt, particularly the United Kingdom, led to the application of the gold standard, on a de facto basis, after almost thirty years of a bimetallic standard.

Following the financial crisis resulting from the accumulation of Egypt's external debt, the Monetary Reform Law was issued in 1885. By virtue of this Law, the gold standard became the basis for the Egyptian monetary system, and the country had a unified currency, the Egyptian gold pound. Thus, the bimetallic standard was officially abandoned.

Owing to the insufficiency of minted new gold pounds, it was permitted to use some foreign gold coins, particularly the Sterling pound, at fixed legal rates. While the Egyptian gold pound was still deemed a legal tender, the Sterling gold pound, which was valued at more than its gold content compared to other foreign gold coins, remained the main medium of exchange, and the monetary system was no longer based on the ordinary gold standard but on the Sterling gold standard.

Gold coins remained the medium of exchange until 1898 when the National Bank of Egypt was established and was granted, by the government, the privilege to issue Egyptian banknotes, payable in gold for a period of 50 years. The National Bank of Egypt started issuing banknotes for the first time on the 3rd of April 1899.

Consequently, the currency circulated in Egypt consisted of gold Sterling pounds and Egyptian banknotes convertible into gold. This situation continued up to 2/8/1914 when a special Decree was issued making Egyptian banknotes a legal tender and suspending their convertibility into gold. Thus, the Egyptian pound banknote became the basic currency unit, and the base of the Egyptian monetary system was changed to fiduciary paper money standard. Accordingly, gold coins were no longer used in circulation, with the result that the volume of note issue increased from LE 11.6 million at the end of 1915 to LE 3557.0 million at the end of 1980, and further to LE 38320.0 million at the end of 1999. In 1930, for the first time in the history of Egyptian banknotes, a watermark was used in issued banknotes. This was followed, towards the end of 1968, by using a metallic thread (in notes issued by the Central Bank of Egypt) as a guarantee against counterfeit instead of dependence on complexity of colors .Other features against counterfeit were found in the detailed specifications of each currency. Holograms are currently added to large denomination notes.

On the 19th of July 1960, Law No.250 was promulgated. It was amended in November of the same year by Law No.277 with respect to the Central Bank of Egypt and the National Bank of Egypt. The Law provided for the establishment of the Central Bank of Egypt conferring upon the CBE the right of issuing Egyptian banknotes. Several changes were introduced with respect to the watermark, the designs shown on the notes and the colors.

The efforts of the Central Bank of Egypt in the field of note issue were culminated in the establishment of a printing plant for banknotes instead of printing them abroad. The plant's production of banknotes in different denominations started in December 1968. The Bank also served some Arab central banks in printing their banknotes.

In view of the increasing need of banknotes to facilitate transactions resulting from the growth of economic activity, following the introduction of the open-door policy, the Central Bank of Egypt issued notes of large denominations (20,50,100).It lanched the denomination of 20 pounds in May 1977 and 100 pounds in May 1979 and 50 pounds in March 1993. .

Note Issue and Cover : 1990-2004

1-The period 1990 -2004 witnessed large and continuous increases in note issue compared with previous periods. The average rate of increase during that period stood at 11.7%.

2- Note issue cover is currently composed of gold and Egyptian treasury notes. The relative importance of such components as at end of June 2004 was as follows: 7.4% gold, and 92.6% treasury notes.

3- The proportional distribution of note issue by denomination as at end of June 2004 was as follows: 30.9% of one hundred pounds, 38.0% of fifty pounds , 18.4% of twenty pounds, 9.2% of ten pounds, 2.1% of five pounds ,0.9% of one pound, 0.3% of fifty piasters and 0.2% of twenty five piasters .

Click any of the pictures on left side for details about each denomination.

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