© Reuters. FILE PHOTO: Egypt’s Central Bank headquarters are seen in downtown Cairo, Egypt, March 22, 2022. REUTERS/Mohamed Abd El Ghany
CAIRO (Reuters) – Egypt’s central bank is transferring the administration and costs of its main subsidised loan programmes to the ministry of finance, according to a circular published on its website on Monday.
The transfer has long been a demand of the International Monetary Fund, which insists that the cost of any subsidy programmes, which are out of the purview of normal central bank activity, be clearly visible in the general budget.
The transfer follows the arrival of new central bank Governor Hassan Abdalla, appointed in August after the abrupt departure of powerful former governor Tarek Amer.
Many of the loan programmes, which cover industry, construction and agriculture as well as tourism and mortgages, were expanded to help companies hurt by the coronavirus pandemic.
The central bank allocated 100 billion Egyptian pounds ($4.07 billion) to finance private industrial, agricultural and construction companies earning more than 50 million pounds through loans with an 8% interest rate, according to the bank’s website.
It also allocated 50 billion pounds to subsidise mortgages for middle-class housing and 50 billion pounds, also at 8%, to help tourism businesses during the pandemic, as well as 35 billion pounds to other sectors.
Egypt pledged in a one-year, $5.2 billion Stand-by Arrangement signed with the IMF in June 2020 that its central bank would not introduce any more subsidised loan programmes and that it would not renew existing programmes.
Any uncommitted interest subsidy costs as of May 2021 were to be borne by the government, and the central bank would restrict its lending to banks to short-term liquidity management, according to the 2020 agreement.
Last month, Egypt and the IMF reached a staff-level agreement for additional $3 billion support under a 46-month Extended Fund Facility, part of a package to help mitigate the financial fallout from Russia’s invasion of Ukraine.
($1 = 24.5599 Egyptian pounds)