Egypt Takes Proactive Measures to Mitigate COVID-19 Impact on Financial Sector
The COVID-19 pandemic has had a significant impact on the global economy, and Egypt is no exception. In an effort to cushion the economic blow, the Egyptian Central Bank (CBE) has taken proactive measures to safeguard financial stability and support vulnerable businesses.
Rate Cut and Support for Key Sectors
On March 16th, the CBE’s Monetary Policy Committee made a decisive move by cutting interest rates by 3%. This rate cut is designed to support national economic activities disrupted by the outbreak. The committee also introduced adjustments to existing initiatives for the industrial, agricultural, and housing sectors, which will be offered at lower interest rates by banks.
Support for Small and Medium-Sized Enterprises (SMEs)
To further support SMEs, the CBE launched an initiative to finance the tourism sector at a preferred interest rate with a repayment tenor of two years. The facility also comes with a six-month grace period starting from the date of granting the loan. This move aims to alleviate the financial burden on SMEs and prevent a potential liquidity crisis in the tourism industry.
Credit Extensions and Support Plans
The CBE has mandated banks to extend credit limits to finance working capital and operational expenses for companies, particularly salaries. Additionally, it directed banks to develop immediate support plans for the most impacted economic sectors.
Postponing Loan Repayments and Credit Registry Changes
To ease the burden on individuals and businesses, the CBE ordered banks to postpone loan repayments by six months with no penalties and without classifying borrowers as non-performing. The move aims to prevent a potential liquidity crisis in the financial sector. Furthermore, the CBE amended the decree regarding credit registry rules for non-performing clients, canceling the blacklist for enterprises and negative list for individuals.
Digital Financial Tools and Virtual Meetings
To facilitate citizens’ access to funds and reduce physical presence in bank branches, the CBE promoted the use of digital financial tools through a range of measures, including:
- Increasing existing wallet limits
- Allowing banks to open new accounts electronically
- Endorsing the use of technology for virtual meetings, including for its Board of Directors
Commitment to Monitoring and Supporting the Financial Sector
The CBE is closely monitoring market developments and committed to introducing further measures as needed to alleviate the adverse economic and financial effects of the pandemic. With these proactive steps, Egypt’s Central Bank is demonstrating its commitment to protecting the country’s financial sector and supporting vulnerable businesses during this challenging period.
Conclusion
Egypt’s response to the COVID-19 pandemic has been swift and decisive, with the CBE taking proactive measures to mitigate the impact on the financial sector. The bank’s commitment to supporting individuals, SMEs, and key sectors is a testament to its dedication to protecting the country’s economy during this challenging time.