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Egypt’s total of 1173 recorded Covid-19 cases and 78 deaths, as of April 5, places Africa's third-most populous country significantly below the global per capita averages for both counts as the pandemic continues to disrupt the global economy.
However, as a result of the sharp growth in international cases and the gradual closing of national borders, in mid-March the government decided to implement travel restrictions.
Egyptian airports were closed to international flights on March 19 for an initial period of two weeks. This shutdown has since been extended to internal flights and will last until at least April 15.
Additionally, on March 25 the government announced a two-week curfew from 7pm to 6am, while pharmacies and food shops will be the only retail establishments allowed to open on weekends and past 5pm on weekdays. Restaurants may only open for deliveries.
Pre-emptive economic stimulus
As the potential economic fallout of the pandemic began to become clear, on March 22 President Abdel Fattah El Sisi announced a comprehensive LE100bn ($6.4bn) package of measures. This included a LE22bn ($1.4bn) stimulus to support the Egyptian Exchange, which should also benefit from a 50% reduction in taxes on the dividends of listed companies.
In addition, the Central Bank of Egypt announced a 3% interest rate cut in what it described as a “pre-emptive move” to support the wider economy.
The outbreak will have a considerable negative impact on one Egypt’s most important industries, tourism. The sector accounted for around 12% of GDP in 2019, with tourism receipts standing at $16.4bn and arrival numbers registering a record 57.5% increase.
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In a further bid to mitigate the impact of Covid-19 restrictions on key sectors, the government has committed to support exporters by allocating LE1bn ($63.5m) for export subsidies during March and April, and will furthermore postpone tax payments for three months on facilities and properties occupied by tourism companies.
Energy prices cut
Following the country’s IMF-backed reforms beginning in 2016, energy subsidies have been gradually removed, resulting in a projected price rise for both households and businesses into 2020.
However, in a bid to offset the impact of the pandemic on industrial output, on March 17 the government announced that the price of gas for industrial providers would be reduced from $5.50 to $4.50 per 1m British thermal units.
As part of the same package of measures, the government also announced that the price of electricity would be reduced for heavy industry consumption, from LE1.10 ($0.07) to LE0.10 ($0.006) per KWh. For other industries, the price is to be kept stable for between three and five years.
Boosting solar capacity
Against the current backdrop of challenging economic circumstances, on April 1 it was announced that the World Bank’s Multilateral Investment Guarantee Agency (MIGA) would provide funding for six new solar power plants at Benban Solar Park in the Aswan Governorate in Upper Egypt, one of the largest such installations in Africa.
The total investment of $52.35m will be issued in the form of guarantees to Norwegian-headquartered photovoltaics firm Scatec Solar, and will be used for the operation and maintenance of the six new plants.
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The amount is guaranteed against the risk of currency inconvertibility and transfer restriction for up to 15 years. It is part of Egypt’s solar feed-in-tariff programme, which provides long-term contracts to private energy companies with a view to generating investment in renewable sources.
“In the face of uncertainty arising from the Covid-19 pandemic, MIGA remains committed to helping drive foreign direct investment (FDI) by supporting investors who are helping Egypt achieve its long-term goals of diversifying its energy mix,” Hiroshi Matano, executive vice-president of MIGA, said in a statement.
While the pandemic has caused a number of delays for the renewables segment, notably the postponement of the construction of four solar plants by domestic firm Inter Solar Egypt, the future bodes well for the expansion of the industry.
“In the current uncertain economic environment, solar energy has become popular, as it can be produced up to 80% more cheaply than other sources,” Yaseen Abdel-Ghaffar, Managing Director of SolarizEgypt and board member of The Solar Company, told OBG. “Although it was initially difficult to secure FDI for projects, banks are becoming increasingly receptive to renewables and a growth in financing is expected after regular economic conditions are re-established.”
By Oxford Business Group
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Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…