Egypt: Interest Rates Threaten Financing Initiatives for Agricultural, Industrial Sectors

Farmers in a rice field in the Egyptian Beheira Governorate (Reuters)

Low-interest financing initiatives are one of the Egyptian government’s tools to support the industrial and agricultural sectors, but the recent rise in interest rates may pose a challenge to these efforts.
Last week, Egypt’s President Abdel Fattah al-Sisi stressed that his country would continue the implementation of economic reform, localize industry, and expand the area of agricultural land. However, he noted that the economic situation was and remains “difficult”.
Egypt has recently given importance to the industrial and agricultural sectors as one of the sustainable solutions to the foreign currency shortage crisis. Last week, the Egyptian government announced support for a soft loan program worth EGP120 billion for free zone factories, agricultural projects, and new and renewable energy.
The new initiative provides financing with an interest rate not exceeding 15 percent for industrial and agricultural activities. Around EGP105 billion will be allocated to finance working capital, in addition to EGP15 billion to purchase machinery, equipment, or production lines.
These initiatives aim to enhance private sector participation in the economy, localize industry, and increase export competitiveness, according to a statement by the Ministry of Finance last week.
MP Tayseer Matar, representative of the Senate Industry Committee, underlined the importance of the initiatives, but noted that they would not contribute to solving the production problem in Egypt.
Quoted by the Arab World Press, Matar said: “Launching any initiative to support industry and agriculture is a good thing, but increasing production in the industrial and agricultural sectors requires financing with a lower interest rate.”
He continued: “The interest approved by the government in the last initiative is very high, and will cause an increase in prices, thus, will not achieve the targets that the government had announced.”
The Egyptian government raised the prices of a wide range of fuel products last month, by up to 20 percent, as part of a commitment it made to the International Monetary Fund (IMF) more than a year ago, which may add a new challenge to agricultural and industrial production.