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Egypt Cabinet Approves Ending State Enterprise Tax Privileges

A crane lifting stones is pictured behind camels resting with their trainers by the Pyramid of Menkaure (or Menkheres, built in the 26th century BC) at the Giza Pyramids Necropolis, west of Cairo, on January 29, 2023. (AFP)
A crane lifting stones is pictured behind camels resting with their trainers by the Pyramid of Menkaure (or Menkheres, built in the 26th century BC) at the Giza Pyramids Necropolis, west of Cairo, on January 29, 2023. (AFP)
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Egypt Cabinet Approves Ending State Enterprise Tax Privileges

A crane lifting stones is pictured behind camels resting with their trainers by the Pyramid of Menkaure (or Menkheres, built in the 26th century BC) at the Giza Pyramids Necropolis, west of Cairo, on January 29, 2023. (AFP)
A crane lifting stones is pictured behind camels resting with their trainers by the Pyramid of Menkaure (or Menkheres, built in the 26th century BC) at the Giza Pyramids Necropolis, west of Cairo, on January 29, 2023. (AFP)

Egypt's cabinet approved regulations on Wednesday that would abolish many tax and fee exemptions for state-owned enterprises, fulfilling a key condition the IMF set in a $3 billion agreement signed a year ago.

The cabinet approved the law in June but had yet to draw up the executive regulations needed for implementation.

The International Monetary Fund in a $3 billion financial support agreement signed in December 2022 urged Egypt to level the playing field between the private and public sectors.

The agreement fell into abeyance after Egypt did not follow through on other commitments, including allowing its currency to move in response to market forces, to move quickly to sell state assets and to reduce the government's role in the economy.

The new regulations "apply to all investment or economic activities undertaken by state agencies." These include "units of the state administrative apparatus, local administration units, national public, service and economic bodies and agencies that have special budgets," the cabinet said in a statement.

The regulations do not apply "to military work and the requirements for defending the country or protecting national security," the cabinet statement said.

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Lagarde: ECB's October Decision Will Reflect Greater Confidence on Inflation

ECB President Christine Lagarde. (EPA)
ECB President Christine Lagarde. (EPA)
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Lagarde: ECB's October Decision Will Reflect Greater Confidence on Inflation

ECB President Christine Lagarde. (EPA)
ECB President Christine Lagarde. (EPA)

The European Central Bank (ECB) is increasingly confident that inflation will fall back to its 2% target and this should be reflected in its October policy decision, ECB President Christine Lagarde said on Monday.

She said cross-border banking mergers in Europe were "desirable" to boost their competitiveness, just as Italy's UniCredit was looking to increase its stake and possibly take over Germany's Commerzbank.

The ECB cut interest rates from record highs in June, and cut again earlier this month, but Lagarde gave few hints at the time about the bank's next move, leaving markets guessing.

Lagarde's comments on Monday will bolster already abundant bets on a further cut in October given a rapid deterioration of the growth outlook and falling energy costs.

Inflation in the 20-nation currency bloc likely fell below the ECB's 2% target for the first time since mid-2021 this month, a raft of national data suggests.

This, along with poor growth indicators, has raised bets on a 25 basis point rate cut in October and markets now see a 75% chance of a move, up from 25% seen early last week.

Lagarde also acknowledged the recent run of poor growth readings.

“Looking ahead, the suppressed level of some survey indicators suggests that the recovery is facing headwinds,” she told a regular hearing of the Committee on Economic and Monetary Affairs.

Still, she repeated the bank's usual line that the recovery is expected to strengthen and rising real incomes should allow households to consume more.

She added that the labor market, the source of some price pressures via rapid wage growth, remains resilient, even if wage growth is moderating and corporate profits are absorbing some pay increases.

Meanwhile, Lagarde said cross border mergers among Europe's biggest banks are needed, just as Italy's UniCredit was looking to increase its stake and possibly take over Germany's Commerzbank.

“Cross borders mergers -- banks that can actually compete at a scale, at a depth and at range with other institutions around the world, including the American banks and the Chinese banks -- are in my opinion desirable,” she told a parliamentary hearing.

She added that her comments should not be taken as a direct intervention in any particular deal.