The Ministry of Finance has launched an initiative to pay export-subsidy arrears from the Export Development Fund before the end of the year, helping to provide exporters with the liquidity they need to keep their labour force amid the coronavirus pandemic and encourage them to expand their investments.
According to the initiative, exporters will not receive the full sum owed to them, but instead will receive 85 per cent of their arrears in cash immediately. Those wishing to receive the whole sum can receive it in installments over four or five years. The government owes exporters some LE12 billion in export subsidies.
A representative from the Finance Ministry met on Monday with the directors of Egypt’s export councils to lay the groundwork for the disbursement plan, which should begin in early November, Hani Berzi, chairman of the Food Export Council, said.
Many companies had welcomed the initiative, preferring to accept 85 per cent of their arrears in cash in order to expand their businesses instead of waiting to receive the whole sum, he added.
The Ministry of Finance said the initiative had been launched to create more job opportunities, increase production, expand the export base, and boost the competitiveness of Egyptian products in international markets in order to raise growth rates and attract new investments.
The initiative will be implemented in cooperation with the banking sector, the ministry added. The banks will immediately pay companies wishing to cash their dues all at once, and the Ministry of Finance will then pay this sum, along with interest, to the banks participating in the initiative in three-year installments.
The initiative reflects deliberations between the ministry, export councils, and leading exporters, the Finance Ministry added.
Companies wishing to benefit from the initiative should sign a final-settlement agreement with the ministries of trade and industry and finance at the Export Development Council, said Ahmed Kouchouk, deputy minister of finance for fiscal policy.
Abdou Shawlah, a member of the Furniture Export Council, said the initiative would allow exporters to lower the costs of exports, consequently decreasing the costs for importers.
Even with a 15 per cent discount on the original sum, the exporters would benefit, Shawlah said, adding that there also needed to be a comprehensive package to support the country’s exporters, including in developing products and facilitating their participation in international trade shows and exhibitions.
He added that there was still not enough support to help develop and upgrade production, unlike in the past when this had been done through the Industrial Modernisation Centre. He said there was less support for industries to showcase their products at international exhibitions today, which had resulted in lower furniture exports, for example. The floatation of the pound in 2016 had also made it costlier to take part in international shows and exhibitions, Shawlah said.
The Ministry of Finance has allocated LE7 billion to support exports in the 2020-21 budget, up from LE6 billion the year before.
According to the 2020-21 state budget, a portion of these subsidies has been allocated to the Export Development Fund from the Ministry of Trade and Industry and the General Organisation for Export and Import Control in line with Article 3 of Law 15/2002.
Egypt’s non-petroleum exports recorded $25.49 billion in 2019, up from $25.14 billion in 2018.
In October 2019, the cabinet approved five initiatives to settle export-subsidy arrears at the Export Development Fund until the end of June 2019. The initiatives included paying off small investors’ dues to a maximum of LE5 million, and 30 per cent of all exporters’ dues, in addition to settling export-subsidy arrears against taxes and customs payments.
*A version of this article appears in print in the 29 October, 2020 edition of Al-Ahram Weekly