Reduced subsidies, a burden on property developers

The Egyptian government announced that it is reducing the subsidised financing tranche allocated within the mortgage financing initiative for the middle-income segment at an 8% interest rate on a decreasing basis to EGP 15bn instead of EGP 50bn according to ministerial decision published in the Official Gazette on 20 November.

The decision, however, stipulates that the Ministry of Housing, Utilities, and Urban Communities would support the interest difference in the initiative and compensate banks for this difference instead of the Central Bank of Egypt (CBE).

Three years ago, the CBE launched an initiative for mortgage financing for middle-income citizens with an annual interest rate of 10% on a decreasing basis before reducing it to 8% in March 2020 due to the COVID-19 pandemic.

The ministerial decision included the transfer of five interest-subsidised initiatives from the CBE to three government agencies, namely the housing ministry, along with the Ministry of Finance, and the Tourism and Antiquities Support Fund. This was one of the International Monetary Fund’s (IMF) demands to reduce the burden on the CBE’s budget.

On 27 October, Egypt announced it reached an agreement with the IMF at the expert level on a 46-month programme of cooperation in economic reform, which includes $3bn in financing in addition to making available an additional $1bn through the IMF Resilience and Sustainability Trust and $5bn more from international partners.