To mitigate the painful Covid-19’s impact on the tourism sector, and following the circulars previously issued by the Central Bank of Egypt (the “CBE”) to support Egypt’s tourism sector, the CBE issued a circular on 16 June 2020 (the “Circular”) to finance the payment of salaries and wages of the employees of the tourism sector.
We will guide you through the key highlights of the Circular
The financing of the payment of salaries and wages
After the CBE’s allocation of EGP 50 billion to finance companies and touristic establishments that wish to renovate their hotels and transportation fleets, the CBE allocated EGP 3 billion of the aforementioned amount to finance (i) the salaries and wages of the sector’s employees for three months starting from May 2020; and (ii) the basic operating and maintenance expenses.
This initiative applies to customers, whether they repay financings on time or not, who undertake any of the following tourism activities:
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- Residential hotels, floating hotels and tourism enterprises with the exception of those built for the purpose of sale
- Travel agency services
- Touristic land transportation
- Restaurants and recreational activities in touristic areas.
In order to benefit from this initiative, companies undertaking any of the above mentioned activities must (i) not have reduced their workforce or decreased wages since December 2019, a requirement that was later removed by a subsequent circular (please see below); and (ii) submit proof that they have not yet disbursed the salaries of May 2020.
The companies are given up to two years, including a one-year grace period, to repay banks partaking in this initiative at a 5% diminishing interest rate.
The CBE Issues a subsequent circular facilitating the procedures
To facilitate the procedures and to provide more flexibility to companies undertaking the activities in question, the CBE issued a circular on 29 June 2020 (the “New Circular”) amending the conditions required for implementing the abovementioned initiative.
The New Circular stipulates the following:
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- The financing of salaries and wages to the employees may be given for any three months to be calculated from the date on which financing is granted
- The one-year grace period mentioned above is not taken into consideration in the context of the two years given to the companies undertaking any tourism activities to repay the banks
- The proof of not reducing the workforce or decreasing wages since December 2019 is no longer required by companies undertaking tourism activities in order to benefit from the initiative.
Market Reaction
In a recent statement, Dr. Mohamed Maait, the Minister of Finance, stated that this initiative will contribute to enabling tourism and hotel establishments, including medium and small companies, to fulfill their obligations to cover employees’ salaries and wages, in addition to covering basic operating needs.
The Chairman and the CEO of Travco Group, Hamed El Chiaty, further announced that the tourism sector welcomes all initiatives by the Egyptian Government. El Chiaty added that this initiative enables companies to disburse salaries and to maintain trained employees.
