Egypt Pumps $6Bn in Banks to Support Businesses
The Central Bank of Egypt (CBE) will provide up to 100 billion Egyptian pounds ($6.36 billion) in loan guarantees to banks to encourage lending to businesses during the coronavirus crisis, the state news agency quoted the bank’s governor as saying on Tuesday.
“The decision comes during increased business risks in the market, especially with regards to companies and finance, Tarek Amer told the Middle East News Agency (MENA).
The loans will carry an interest rate of eight percent, well below the central bank’s key overnight lending rate of 10.25 percent.
Amer announced that the decision aims aiding the initiatives to pump loans into the markets for companies to achieve their economic goals.
It will contribute to motivating banks to pump loans to private sector companies in order to maintain their entities and employees.
The issuance of these credit guarantees will be through the central bank’s Credit Risk Guarantee Company.
The amount allocated will cover the entire industry, agricultural and contracting sector initiative loans, Amer said.
He explained that in return, companies shall issue guarantees to the banks, amounting to 80 percent of the amount of any loan the banks use, while banks will bear only 20 percent of these risks.
The Governor pointed out that the company has so far given EGP25 billion-worth ($1.6 billion) loan guarantees for small and medium projects.
“The company’s system will also be modified to allow it to add loan guarantees for larger companies.”
In December 2019, the CBE issued several initiatives to support Egypt’s economy, including an EGP100 billion initiative supporting the industrial private sector funding, at a rate of 10 percent.
In March, it added the agricultural sector under the EGP100billion initiative umbrella, reducing its interest to a declining eight percent.
Last week, it announced that it will be adding the contracting sector to the initiative, as part of its measures to support Egypt’s economy during the ongoing coronavirus pandemic.
Deputy Governor of the CBE Rami Aboul Naga said in statements earlier this week that the bank had issued initiatives worth over EGP500bn.
The initiatives are designed to help companies overcome the current situation and maintain employment, and include the tourism, real estate, industry, agriculture, and contracting sectors.
The pandemic has wreaked havoc on Egypt’s economy, particularly with the virtual shutdown since March of the country’s tourism industry, which represents about five percent of gross domestic product, and the closure of restaurants and cafes.