Revamped export subsidy program to double rates across the board

More on the updated export subsidy program: The government is preparing to unveil a revamped export subsidy program that will roughly double support rates across all sectors, introduce new incentives for branded exports, and prioritize higher value-added sectors, two sources with knowledge of the matter told EnterpriseAM. The framework — discussed with export councils in mid-April — is expected to be formally announced soon, come into effect at the start of the new fiscal year on 1 July, and run through 2028.

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The breakdown: Baseline subsidy rates will rise to 5-6% in the upcoming fiscal year, up from around 3% for the engineering, pharma, and chemicals sectors, while rates for other sectors will roughly double from their current levels. Companies exporting under Egyptian brand names will also receive an additional 2%, with earmarked support for registering trademarks abroad and entering new markets for the first time.

IN CONTEXT- Facing budget constraints, the government slashed export subsidy rates by upto 70% across all sectors this fiscal year. The new fiscal year will see the launch of a revamped program with a significantly larger allocation of EGP 44.5 bn, according to the draft state budget.

Priority sectors: The government will place particular emphasis on supporting the engineering, pharma, and chemical industries under the new scheme. Other sectors will remain eligible, though at varying support rates. Exporters operating in specialized industrial zones could also be in for preferential terms.

Local content requirements will be left unchanged for now: The local content requirement will remain at 35%, rather than the 40% threshold originally proposed by the export councils, to prevent a large number of companies from falling out of eligibility, the sources said. The government is studying a gradual increase in the coming years as part of a longer-term plan to raise the value-added of Egyptian exports.

And exporters can keep their USD proceeds: The revamped program scraps the requirement that exporters give up 50% of their USD proceeds, the sources said, adding that export councils have been lobbying for the removal of this requirement to improve liquidity and competitiveness.

Calls for clarity and quicker payments: The Engineering Industries Export Council has proposed rolling out a simplified version of the program with clear and fixed contribution rates, council head Sherif El Sayad told EnterpriseAM. “It’s a good step,” he said of the new 5-6% range — double the current rate — “but what would truly satisfy us is reaching an 8% minimum support rate.”

The council is also pushing for subsidy disbursements to be made within a maximum of three months and in cash to accelerate working capital cycles, according to El Sayad. It has urged the government to avoid any surprise deductions from subsidy entitlements, warning that exporters operate on slim margins.

Africa gets special attention: The updated framework will provide additional support for exports to African markets, particularly through enhanced shipping and logistics incentives, the sources added — part of Egypt’s wider push to establish itself as a continental trade hub.