The Central Bank of Egypt (The “CBE”) recently issued three circulars (The “New Circulars”) extending initiatives that aim to support Egypt’s tourism sector. The New Circulars extend three previous initiatives and launch a new one. The initiatives come in line with the government’s vision to boost the tourism sector as one of Egypt’s major pillars of the national economy as it creates new jobs and provides a huge income to the Country in foreign currency.
The New Circulars have been issued by the CBE on January 8th, 2020 in the form of direct letters addressed to all Egyptian licensed Banks.
We will delve into the key highlights of the new initiatives below.
The CBE Tourism Support Initiative
This initiative entails that any request for the deferral of tourism-related dues will be accepted for three years at most. In this regard, the circular stipulates that banks are obliged to study each application separately using the initiative’s provisions as guidance and make its decision accordingly.
The CBE’s initiative to support tourism was originally launched in March 2013 and amended in 2016.
Since then, the initiative has been extended several times, the last of which was until the end of December 2019. According to the New Circulars, this initiative is now extended for an additional year until the end of December 2020.
The CBE Tourism-Related Renovations Initiative
This initiative comes to replace its predecessor without any drastic changes to its provisions. The initiative aims to finance companies and touristic establishments that wish to renovate their hotels and transportation fleets. The CBE decided to allocate EGP 50 billion through Egyptian banks (with 10% declining interest rate). The main difference with this initiative is the increase of the funds allocated for loans from EGP 5 billion to EGP 50 billion. Additionally, the loan period increased from 10 years to 15 years, while the declining interest rate at 10% remains unchanged.
According to the New Circulars, this initiative is now extended for an additional year until the end of December 2020.
The CBE Initiative in Support of Tourism Companies
The New Circulars add this initiative in order to provide support to financially distressed companies. This initiative allows companies operating in the tourism sector with a debt exceeding EGP 10 million to be removed from the ban lists of both the CBE and the Egyptian Company for Credit Rating “I-score”, provided that the mentioned companies make payments of at least 50% of their debts before 31 December 2020.
In addition, said companies will have other benefits such as the removal of any restrictions concerning the previous debt and the freeing of guarantees attached to it. In addition, banks are also required to discontinue any pending court cases against said companies as soon as the two parties agree on the terms of payment.
The CBE Tourism Employees Initiative
The Tourism Employees Initiative allows banks to defer payments related to tourism employees’ personal loans or mortgages for six additional months from the currently applicable due dates. This applies only to clients who had performed their obligations up to 30 September 2019.
This initiative was originally launched in 2015 in support of struggling tourism sector employees. It has been renewed several times since then, the last of which was until December 2019. Pursuant to the New Circulars, this initiative is now extended for an additional year until the end of December 2020.
Market Reaction
Hossam El-Shaer, head of the Egyptian Travel Agencies Association, stated in an interview that the financing program will breathe new life into Egypt’s tourism sector. El-Shaer further added that hotels and tourism fleets are in dire need of development and the CBE’s initiatives will make these developments more feasible.
