Tuesday, December 6, 2022
HomeLoansThe Central Bank of Egypt is transferring subsidized loan programs to the...

The Central Bank of Egypt is transferring subsidized loan programs to the government as requested by the IMF.

This transfer has long been a requirement of the International Monetary Fund, which insists that the costs of any subsidy program that fall outside the scope of normal central bank activity must be clearly visible in the general budget.

The move follows the arrival of new central bank chief Hassan Abdalla, appointed in August after the abrupt departure of powerful former governor Tarek Amer.

Many of the loan schemes, which cover industry, construction and agriculture as well as tourism and mortgages, have been extended to help businesses affected by the coronavirus pandemic.

The central bank has set aside 100 billion Egyptian pounds ($4.07 billion) to finance private companies in industry, agriculture and construction earning more than 50 million pounds through loans at 8% interest, according to the bank’s website.

It has also set aside £50 billion to subsidize mortgages for middle-class homes and £50 billion, also 8%, to help tourism businesses during the pandemic, as well as £35 billion for other sectors.

Egypt has pledged, under a one-year, $5.2 billion standby agreement signed with the IMF in June 2020, that its central bank will no longer introduce support for lending programs and that it will not renew existing programs.

Any uncommitted interest subsidy costs from May 2021 would have to be borne by the government, and according to the 2020 agreement the central bank would limit its lending to banks for short-term liquidity management.

Last month, Egypt and the IMF reached a staff-level agreement on an additional $3 billion in support under a 46-month extended credit facility, part of a package of measures to cushion the economic fallout from Russia’s invasion of Ukraine.

($1 = 24.5599 Egyptian pounds)

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