A fresh subsidized loan program: Prime Minister Moustafa Madbouly approved a new EGP 120 bn program of subsidized loans for manufacturers in freezones as well as agriculture and renewable energy companies in a bid to boost private-sector involvement in the economy, the growth of the domestic manufacturing industry, and the competitiveness of the nation’s exports, Finance Minister Mohamed Maait said in a ministrystatement yesterday.

The nitty gritty: The new program will offer financing at an interest rate of 15% for agriculture and manufacturing players. EGP 105 bn of the package will be earmarked for financing working capital, while the remaining EGP 15 bn will be allocated to the financing of capital expenditures for production lines and related facilities.

The financing is more expensive than last time: The interest rate for the new batch of subsidized loans is four percentage points higher than the 11% interest rate offered the last time the government offered cut-rate finance back in January 2023.

But this is still nearly half of the CBE’s policy rate:The 15% interest rate charged in the initiative is nearly half the central bank's post-float 28.25% lending rate. Finance Ministry sources told us last week that the government is likely to raise rates on the new initiative to 15%, seeing as the state has already doled out some EGP 88 bn worth of financing over the past five years through various industrial financing packages.

The price tag? This round of the initiative will cost the state an annual EGP 8 bn, Maait said.

How will it work? Local banks will disburse the loans to those eligible and in return receive the difference between the 15% rate and the corridor rate from the Finance Ministry.

Remember: The central bank in 2022 scrapped its 8% subsidized loans for the industry, agriculture, and construction sectors, ending support for its subsdized loans and passing the responsibility on to ministries as part of the IMF’s conditions for Egypt’s IMF package.

Companies will also be able to take out bigger loans: The new financing initiative has increased the maximum financing threshold for individual companies to EGP 100 mn up from EGP 75 and will allow associated companies to take out up to EGP 130 mn, instead of the previous EGP 112.5 mn cap.

What about projects that secured loans under the previous 11% program? Maait said the government will keep subsidizing any financing granted under the previous iteration of the program, which offered EGP 150 bn worth of loans at a subsidized 11% interest rate to industry and agriculture players.

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