Egyptian President Mohamed Morsi with International Monetary Fund (IMF) managing director Christine Lagarde. Egypt is seeking a nearly $5 billion loan from the U.S.-based bank linked to ongoing neo-colonialism and underdevelopment within Africa., a photo by Pan-African News Wire File Photos on Flickr.
Egypt govt announces economic reform measures to clinch IMF loan
Bassem Abo Alabass, Karim Hafez, Monday 25 Feb 2013
Government unveils modified economic recovery programme that aims to meet IMF's pre-conditions for proposed $4.8 billion loan to Egypt
The government has revealed 24 new measures as part of an economic reform programme aimed at kick-starting Egypt's struggling economy, which will be presented to the International Monetary Fund in order to obtain approval of a badly needed $4.8 billion loan.
Ahram Online has obtained a copy of the economic programme, which was drafted following an 'economic initiative' conference in late December launched by the Egyptian Cabinet, in cooperation with private-sector representatives and economy experts.
The following are the most significant measures to be implemented according to the new programme.
The programme raises the minimum monthly salary eligible for income tax exemptions from LE9000 to LE12,000 as of October 2013.
The first bracket of the new income tax structure, which will pay 10 percent in income tax, will be extended to LE30,000 per month from a previous LE20,000.
"The increase means that employees whose monthly salaries range between LE20,000 and LE30,000 will only pay 10 percent in taxes, compared to the previous 15 percent," Assistant Finance Minister Hani Kadry told Ahram Online.
The increase, according to Kadry, will be implemented once Egypt's Shura Council (the upper house of parliament) approves it.
Additionally, a 0.001 percent tax will be imposed on all stock market transactions, while a corporate tax will be standardized at 25 percent for all companies.
As it currently stands, Egypt's corporate tax ranges between 20 and 25 percent, based on respective companies' financial situations.
The reform programme will also raise the total number of beneficiaries of monthly social security pensions (LE300) to 1.5 million people by June of this year and 2 million people by June 2014.
The reform programme also calls for the government to adopt an emergency plan to develop Egypt's railway system at a cost of some LE1.2 billion during the current and coming fiscal years.
It also calls for developing 68 shantytowns nationwide at a total cost of some LE600 million during the 2012/13 and 2013/14 fiscal years.
The economic recovery measures also call for raising the local price of one ardeb (198 kg) of wheat by LE20 to LE400 in order to boost local production.
Foreign reserves & GDP
The Egyptian government forecasts that successful implementation of its economic recovery programme would lower Egypt's budget deficit by the end of the 2014/15 fiscal year to LE183 billion, constituting almost 7.7 percent of GDP – compared to the 10.9 percent forecast for the current fiscal year.
Egypt's current budget deficit stands at LE170 billion, approximately 10.8 percent of the country's GDP.
If the programme is successfully implemented, Egypt's foreign currency reserves – which currently stand at an alarming $13.6 billion – are expected to rise to $22 billion by the end of the current fiscal year.
Egyptian stock market drops for a second day as protests continue
Ahram Online, Monday 25 Feb 2013
Stocks did rebound at the close of the session, signaling a possible end to the downward trend tomorrow
Egypt's benchmark EGX30 index dropped 0.57 percent to 5,548 points on Monday, while the broader EGX70 index dropped 0.58 percent, as investors express concern about political unrest in the country.
“The drop in the market today is a continuation of what started yesterday,” said Ashraf Abdel-Aziz, head of institutional sales at Cairo-based brokerage Arabeya Online.
“Investors have not seen any improvement in the political situation, and this is reflected in today’s decline,” said Abdel-Aziz.
Civil disobedience campaigns in the Nile Delta cities of Mansoura and Mahalla, in addition to the Suez Canal city of Port Said, caused the main index to plummet, losing 0.84 percent in Sunday’s session.
Stocks did, however, experience a “rebound” near the end of the trading session according to Abdel-Aziz. “This is an indication that the market will either pick up or at least stabilise in tomorrow’s session.”
A total of 92 traded stocks declined on Monday, including blue chips Orascom Construction Industries, which fell 0.54 percent, and Commercial International Bank, which lost 0.23 percent.
Among the 41 gainers, National Societe Generale Bank, which gained 1 percent, was buoyed by this morning’s announcement that the Egyptian Financial Supervisory Authority had approved an offer by Qatar National Bank to acquire 100 percent of NSGB.
QNB had initially planned to acquire only 77 percent of NSGB, but EFSA obliged it to submit an offer for the entirety of the French-owned bank’s Egyptian arm.
Arab investors ended the day as net sellers, to the tune of LE11.7 million, followed by non-Arab foreigners who net sold for LE4.9 million. Local investors were net buyers, to the value of LE6.7 million.
Total daily turnover for the session was weak, registering a mere LE262 million.
Egypt's President Morsi unveils raft of tax, subsidy reforms
Ahram Online, Monday 25 Feb 2013
President Morsi introduces novel tax and subsidy reforms, discusses Egypt's short-term economic prospects in televised interview Sunday night
In a televised interview Sunday night, President Mohamed Morsi unveiled a raft of new tax reforms.
For one, the president announced that the minimum monthly income for income tax exemption would be raised from LE9000 to LE12,000, which, he said, "will alleviate the tax burden on an additional 2.5 million Egyptian families."
He also declared that social security pensions for low-income families would be raised by LE100 to LE400 a month according to the new state budget.
The president spoke at length about the state of the national economy during the two-hour interview, including the issues of foreign borrowing, taxation, subsidy reform and social justice.
He announced that the price of one ardeb (198 kg) of wheat would be raised by LE20 to LE400 in order to boost local production, and that new measures would be taken to facilitate supply, which, he said, "I know remains a problem for farmers."
"The price of rice has gone up by LE2000 as we had promised farmers," Morsi went on, "since we are now exporting rice."
The president also confirmed implementation of a progressive property tax, starting in July of this year, on all properties worth LE2 million and above, saying that "50 percent of property tax revenue will be spent on providing public services such as shantytown development and healthcare."
Regarding a proposed $4.8 billion loan Egypt has been struggling to secure from the International Monetary Fund, the president asserted that the IMF loan "also represents certification that Egypt’s economy is capable of surmounting the current period." He added that the IMF "does not intervene in our affairs, but we need this certification in order to unlock more investment."
In January, the European Council announced that the EU would grant a $6.5 billion load to Egypt once the latter had sealed its loan agreement with the IMF.
As for state subsidies, which require reform in order to meet the IMF's loan conditions, the president pledged that subsidies on goods and transportation "will remain in place for those in most need of them."
As evidence of the government's ability to target subsidised goods towards the needy, Morsi cited the success of a new allocation system for butane gas canisters, asserting: "This winter is the first in 15 years to see no shortages of butane gas canisters."
"Microbus and truck drivers who need subsidised fuel will find it available at the same prices," the president added, "but not those who steal and smuggle it for profit."
Last week, the Ministry of Petroleum and Mineral Resources announced plans to begin rationing subsidised fuel through a new 'smart-card' system beginning in July of this year.
Asked about recent statements allegedly made by Prime Minister Hisham Qandil – that Egyptians would only be entitled to three loaves of subsidized bread per day – Morsi vehemently denied them as "media fabrications." The president also denied that there were any problems regarding the availability of subsidised bread, though in some areas, he conceded, "the quality of the bread may be less than optimal."
According to the president, a system of universal health insurance will be implemented in three phases beginning next year, with LE5 billion to be allocated from the next budget during the first phase.
Morsi also promised to issue a decree in the near future absolving students in the public education system who had failed to pay their tuition fees for the current academic year.
The president went on to deny that there were any special ties between certain businessmen affiliated with the Muslim Brotherhood – the group from which Morsi hails – and his administration. "We suffered from this phenomenon under the former regime, and do not want to see it repeated," he said.
President Morsi also confirmed that draft legislation was now on the drawing board aimed at reinstating Port Said's duty-free zone – abolished by the Mubarak regime in 2002 – and that LE75,000 had been earmarked for compensating the families of Port Said residents slain in last month's political violence.