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Tuesday, 26 January 2021

How is Egypt working to offset the coronavirus’ impact on its economy?

Egypt has allocated EGP 100 billion to contain the COVID-19 outbreak. Ahram Online takes a look at the key aspects of the economic measures being implemented in the wake of the crisis

Doaa A.Moneim , Tuesday 24 Mar 2020
A woman wears a protective face mask inside a Carrefour hypermarket while Egypt ramps up its efforts to slow the spread the coronavirus disease (COVID-19) in Cairo, Egypt March 19, 2020. (Reuters)
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Views: 5922

In a bid to curb the impact of the coronavirus on Egypt’s economy and to keep the gains from its economic reform programme, the government has adopted a package of preventive and precautionary for various sectors.

President Abdel-Fattah El-Sisi instructed the cabinet on 14 March to allocate EGP 100 billion for the state’s plan to contain the outbreak.

Here is what you need to know about the measures involved.

The manufacturing sector

On 21 March, the cabinet announced it would lower natural gas prices for the manufacturing sector and provide EGP 1 billion for exporters.

The decisions included reducing natural gas prices to $4.5 per million British Thermal Units (mmBtu) for industry, and lowering electricity prices by ten piasters for heavy and average-use industries.

The government said it would keep power prices for other sectors unchanged for the upcoming three to five years.

An outstanding property tax on factories and touristic institutions will also be postponed for three months, and it will be paid following that period in monthly instalments for six months.

For exporters, Finance Minister Mohamed Maait announced on 23 March that EGP 100 billion had been allocated for March and April to pay arrears for exporters affiliated with the investment initiative the government announced in October 2019.

“In light of the initiative, settlement agreements have been inked with 77 export enterprises and 10 percent of exported entitlements have been disbursed for the third time during 2020 to stimulate investment and boost national manufacturing to increase production, expand exports, boost sustainable growth and enhance the structure of the national economy to achieve better living standards and better services quality," Maait said.

The stock exchange

Government actions also included a catalytic package for Egypt’s stock market, including lowering stamp tax for foreign investors from EGP 1.5 to EGP 1.25 per EGP 1,000 and for local investors from EGP 1.5 to EGP 0.50 per EGP 1,000, until the implementation of a capital gains tax in 2022.

It also exempted immediate stock transactions from stamp duty to boost trading, and exempted foreign investors from the capital gains tax and delayed its implementation for local investors to January 2022.

A tax on dividend distribution by listed companies was halved to 5 percent.

Following that, the National Bank of Egypt and Banque du Caire allocated EGP 3 billion to boost the stock market after a deteriorated performance on the back of COVID-19 outbreak.

Moreover, El-Sisi instructed the Central Bank of Egypt (CBE) on 22 March to invest EGP 20 billion in the stock exchange.

The banking system and monetary policy

On 16 March, the CBE introduced an unprecedented 3 percent (300 bps) interest rate cut at an urgent meeting.

It cut the overnight deposit rate, overnight lending rate, and the rate of the main operation to 9.25 percent, 10.25 percent, and 9.75 percent respectively, with a decrease in the discount rate by 3 percent to 9.75 percent.

According the monetary policy committee’s statement, the new cuts provide appropriate support to domestic economic activities given the current challenging global environment, while the inflation outlook remains consistent with achieving the inflation target of nine percent (±3 percentage points) in the fourth quarter of 2020.

CBE Governor Tarek Amer said that the new cuts are the largest since the flotation of the Egyptian pound in November 2016 and are expected to boost public, private, and enterprise sector companies.

“The new cuts will support companies significantly, particularly now that their debts have hit EGP 2.8 trillion. These debts will decline by billions after the new cuts have been introduced, easing the burden of both the private sector and finance ministry,” said Amer.

He added that the domestic debt exceeds EGP 4 trillion, and the new cuts will help the finance ministry to boost other sectors. In addition, the new cuts will have a positive impact on clients at banks.

The CBE has instructed all banks to put off debt payments of small and medium-sized companies for six months, with no fines incurred, and has urged people to use digital payments instead of paper money.

Moreover, the CBE adopted new measures to postpone credit payments for six months on all credit entitlements as of 16 March.

The new facility is applicable to regular and non-regular clients, individuals and corporations alike, including finance leasing, real-estate finance, factoring, and small and medium-sized enterprises, and it is applicable to beneficiaries of CBE initiatives.

Consumer loans, including personal loans, credit cards, loans for buying cars for personal use, and real-estate loans for personal housing are covered under the facility.

New credit facilities applied for after 16 March are excluded.

The CBE has also increased the limit on electronic payments via mobile phones to EGP 30,000 per day and EGP 100,000 per month for individuals, and EGP 40,000 per day and EGP 200,000 per week for corporations.

The central bank also sent directives to banks on Saturday telling them to make available online accounts to clients that are accessible through mobile phones, using clients’ registered data.

The CBE also increased the number of electronic cash units for every bank to EGP 500,000, allowing account transactions from within the same bank or from one bank to another.

The CBE also instructed banks to issue free, pre-paid banking cards for citizens for six months and to raise their limits from EGP 300 to EGP 600 without the need to enter a password.

Inter-bank services will follow the current rules, giving banks the right to register their clients for this service after confirming their identities.

The new procedures exempted payment outlets from all fees and commissions on operations that are carried out through banking cards or mobile phone portfolios.

Income, wages and pensions

Finance Minister Mohamed Maait announced that the coming 2020/2021 fiscal year will see an increase in the tax exemption ceiling from EGP 8,000 to EGP 15,000, in addition to raising the personal exemption ceiling to EGP 24,000.

He added that a new tax bracket of 2.5 percent for those whose income is under EGP 35,000 annually will be implemented.

Furthermore, state employees subject to the civil service law will be granted 7 percent of their basic payroll salary as a salary increase as of 30 June, with a minimum of EGP 75 monthly and no maximum, while employees who are not covered by the law will get an increase of 12 percent with the same conditions, Maait said.

Putting El Sisi’s directives into effect regarding pensioners and their delayed bonuses, the treasury will shoulder the cost of the five bonuses that will be paid to pensioners, worth EGP 35 billion for the current year and EGP 7 billion annually over the coming years.

In a statement, Maait said that flexible wage pensions will be resettled, adding 80 percent from the special bonuses which are not included in the basic wage for pensioners whose service ended between 1 July 2006 and 30 June 2016.

The minister added that the state wants to improve pensioners' living standards and that it is keen on solving the accumulated problems of the pension system.

“By the end of March, the ministry will have paid EGP 120.4 billion for pension funds from a total of EGP 160.5 billion for the current fiscal year," said Maait.

Maait said that increments and additional bonuses for state employees in the coming fiscal year will cost EGP 31 billion, while new decreases in earned income tax will cost EGP 4 billion.

The minister said that the president’s decree extending the stoppage of agriculture land tax for two years was part of moves to enhance social protection pillars and to alleviate the negative impacts of COVID-19 on citizens.

He added that the Egyptian Tax Authority (ETA) has implemented the presidential directives abolishing the administrative sizings imposed on taxpayers who are in arrears in exchange for them paying 10 percent of their tax arrears.

The ETA also resettled their tax files through dispute resolution committees to give them another chance to settle their disputes with the tax administration without resorting to courthouses, to enhance taxpayers' confidence, attract more investments, and generate more jobs.

The irregular workforce

On 12 March, El-Sisi instructed the government to intensify efforts supporting the irregular workforce and the neediest categories.

Implementing his directives, the manpower ministry has disbursed an exceptional grant for about 120,000 irregular workers who are affected by the COVID-19 crisis, amounting to EGP 500 each.

Social Solidarity Minister Nevine El-Qabbag announced on 21 March that 100,000 families will be enrolled in Takaful and Karama social protection programme, urging all irregular workers to log their data into the irregular workforce database to meet this category’s needs in the current phase.


Speaking to Ahram Online, the head of the Egyptian Tax Authority Reda Abdelkader said that all taxpayers are to submit their tax returns electronically, explaining that the ETA has activated a tax payment mechanism through smart cards to allow taxpayers to make payments without needing to visit the ETA or banks.

Abdelkader also clarified that payment methods are available through online electronic payment portals, using all kinds of cards, including Meza, Master Card, and Visa.

He added that legal entities, whose payment date is on 30 April, are obligated to make their payments electronically, while electronic payment is optional for individuals, whose payment date is 31 March.

He also said that the ETA has extended the payment due date for individual taxpayers to 16 April.

He added that Maait has approved the waiving of fees for electronic payments for individual taxpayers for 2020, to encourage them to submit their returns online.

Emphasising the stability of Egypt’s fiscal situation, Maait previously said that the country’s fiscal performance indices over the last eight months of the 2019/2020 fiscal year were good, attaining a primary surplus of EGP 38 billion, accounting for 0.5 percent of the GDP, up from EGP 28.5 billion the previous fiscal year.

He added that the overall deficit recorded 4.9 percent, explaining that financial burdens and obligations were paid early from October to December 2019 instead of the scheduled April to May 2020, which reflects the stability of Egypt’s fiscal position.

He also said that there are presidential policies for the coming fiscal year, which begins on 1 July, that focus on the middle class, priority care groups, education, health care, manufacturing and export-boosting initiatives.

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