CBE takes measures to reduce economic impacts of COVID-19

Hossam Mounir
12 Min Read
female hands holding phone with mobile wallet for online shopping over the desk

The Central Bank of Egypt (CBE) has announced 14 measures to reduce the repercussions of the coronavirus (COVID-19) pandemic on the Egyptian economy.

These measures have greatly assisted in supporting economic performance and contributed to mitigating the negative social and economic impacts of the pandemic.

They are also being put in place to preserve Egypt’s economic gains achieved since the launch of the economic reform programme.

Interest rate cut by 3%

In a recent report, the CBE said that these measures began on 16 March, with a decision to reduce the basic rates of return by 3%. This means that basic rates of returns for deposits now stands at 9.25%, 10.25% for lending, and 9.75% for credit, discount, and basic operation prices.

The CBE said this move comes in light of global developments and conditions to preserve Egypt’s economic gains since the launch of the national economic reform programme.

Loan instalments delayed

The second of these measures was to postpone loan instalments for companies and individuals for a period of six months. The instalment postponement includes loans for consumer purposes, mortgage loans for personal housing, and medium and small business loans. No additional returns and fines would be applied to late payments.

Limiting cash transactions

The third measure was to encourage customers to turn to electronic payments, by facilitating the use of electronic payment methods and tools. This would limit the physical contact required in cash transactions. Fees and commissions applied to points of sale and withdrawals from ATMs and electronic wallets have been cancelled for six months.

Local Egyptian Pound transfers have been exempted from commissions for three months to reduce cash transactions, because of the risk they may pose on public health.

The procedures also include some exceptions for using electronic payment methods, including adjusting the maximum limits for mobile phone accounts and prepaid cards. It also covers opening bank and internet phone accounts for existing bank customers using the data previously registered with the bank.

Electronic wallets and prepaid cards will be issued for free for six months, with a daily maximum amount set on withdrawals and deposits at bank branches of EGP 50,000 for individuals. The limit has temporarily been set to EGP 20,000 for withdrawals and deposits from ATMs.

Funding available for basic commodity imports

The fourth measure will see the necessary funding provided to finance imports of strategic goods, and support the sectors and companies most affected.

In this regard, the CBE issued its instructions to banks to provide the credit limits necessary to meet import financing for basic and strategic commodities, especially food commodities. The aim is to cover market needs, and study and monitor the sectors most affected by the coronavirus. Plans will also be developed to support companies operating in these sectors, and finance working capital especially employees ’salaries.

Reducing initiatives’ interest

According to the CBE, the fifth measure is related to adjusting the rate of return on initiatives launched earlier. This follows the decisions issued by the Monetary Policy Committee (MPC) to reduce the CBE’s basic interest rates.

In this context, the rate of return applied to the following initiatives has been modified to 8% instead of 10%. This included real estate financing initiatives for middle-income sectors, the private industrial and agricultural sectors, and tourism sector support to finance the rejuvenation and renewal of hotels.

Supporting the tourism sector

The CBE allocated the sixth measure to supporting the tourism sector, where it announced increasing allocations to replace and renew residence hotels, floating hotels and tourism transportation fleets. The finance for this now stands at EGP 50bn, instead of EGP 5bn, at a rate of 8% decreasing return and for a maximum period of 15 years.

The CBE also decided to grant credit facilities to be paid in a maximum of two years. This comes in addition to a six month grace period to pay salaries, dues and maintenance work fees for tourism activities.

Defaulting clients can benefit from the initiative if they settle within the framework of CBE’s initiatives for customers who do not pay regularly.

The CBE also announced an initiative for defaulting clients operating in the tourism sector. The initiative would be applied to tourism companies whose debts amount to EGP 10m or more without marginal returns. This initiative includes removing companies operating in this sector from blacklists once an agreement is reached on payment terms. Company names would also be removed in case all lawsuits in court are waived and guarantees written related to that debt.

The CBE also decided to extend the validity period for the previously issued tourism sector support initiative for a further year, ending in December 2020. During that period, any requests to postpone bank dues will be accepted, for a maximum period of three years, with no delay fines applied on instalments.

The CBE also extended the validity period for a year, ending in December 2020, on the retail loans initiative for tourism sector workers. During that period, banks are allowed to postpone for six months, from their due date, customer instalments for consumer purposes and real estate loans for personal housing. This will only be applied to regularly-paying consumers based on their situation on 30 September 2010, with no delay fines imposed.

Supporting defaulting companies

The CBE has devoted the seventh measure to supporting all defaulting companies, whether there were legal measures taken against them or not. They must be regular clients with debts under EGP 10m (without marginalised returns) they will be unlikely to repay.

A customer would be waived from the ban list in case they have made cash or in-kind payment for part of the debt, with all lawsuits filed against them waived.

Supporting defaulting individuals

The eighth measure is aimed at defaulting clients who have not been making regular payments until 30 September 2019, with their total debts (without marginalised returns) amounting to less than EGP 1m without credit card dues.

Under this initiative, all lawsuits against these individuals would be waived once the payment terms are agreed upon. Their names would also be removed from bank lists once they make a payment equivalent to 50% of the net debt, without the marginalised returns, starting from the current period until 31 March 2021.

The EGP 100bn initiative

The ninth measure includes making EGP 100bn available through banks, with a decreasing annual rate of return of 8%. The aim is to fund the industrial private sector companies and corporates operating in the agricultural field, including agricultural production and processing.

This would include export and packing stations for agricultural commodities, refrigerators, fish, and livestock companies whose annual revenues amount to EGP 50m. The initiative also provides credit facilities to finance the purchase of raw materials, production requirements, machinery, equipment production lines, and capital funds.

Non-performing clients also benefit from this initiative if they settle their debts, as part of the CBE’s initiatives for non-performing clients. Initiatives to finance small companies with annual revenues of between EGP 1m and EGP 50m at a 5% return rate would continue.

Included in the initiative are companies operating in the contracting sector whose annual revenues amounted to EGP 50m or more to the beneficiaries. This sector is the main driver for many industrial and service sectors, and is one of the largest employers in the Egyptian market.

EGP 50bn to support middle-income housing

The CBE’s tenth procedure will see EGP 50bn allocated through banks at 8% return rate. This is calculated on a decreasing basis for a maximum period of 20 years under specified conditions. This amount is directed to middle-income real estate finance clients who have a maximum monthly income of EGP 40,000 per person, and EGP 50,000 for a family.

Organising bank board meetings

The CBE’s eleventh procedure covered bank board meetings, and will see no limits set for each board member to participate in the meeting via video or phone. It is also not necessary that all members should be present if an approval was obtained from the CBE’s Control and Supervision Department.

This measure aims to facilitate banks to carry out their tasks in the best way possible, taking into account the current exceptional global circumstances.

Cancelling blacklists

The CBE’s twelfth measure will see blacklists cancelled of institutional clients and individual customers who obtained loans for consumer purposes. This would happen alongside reducing the terms of disclosure of historical information to customers after payment. The CBE has also decided to filter the databases of non-performing clients and delete customers with debts under EGP 1,000 exceptionally for one time.

Capital Adequacy Standard Controls

The thirteenth measure is a one-year exemption for banks on calculating weighted risk as part of the capital adequacy rate on the total value of credit facilities. These refer to those facilities granted to the largest 50 customers and related parties in the bank, covering 50% of the bank’s credit portfolio.

Controls for preparing financial statements

The fourteenth measure was is to allow banks to issue brief quarterly financial statements, in accordance with Egyptian Accounting Standard No. 30. This would happen provided that full annual financial statements are prepared at the end of December 2020, for banks whose annual financial statements are prepared in late December of each year. Banks that usually prepare their financial statements in late June every year should prepare them in late June 2021.

The CBE has decided to exclude loan instalment repayment period for six months so it would not be considered an indicator of a significant increase in the level of credit risk. This should happen while the bank adheres to its responsibility of evaluating its credit portfolio to maintain its quality and assess customers’ ability to pay.

Share This Article