The headquarters of Central Bank of Egypt in Cairo. Reuters

Egypt’s central bank (CB) will provide up to 100 billion Egyptian pounds ($6.36 billion) in loan guarantees to banks to encourage lending to businesses during the coronavirus crisis, the state news agency quoted the bank’s governor as saying.

Central bank governor, Tarek Amer, told the agency: The decision comes during “increased business risks in the market, especially with regards to companies and finance.”

The loans will carry an interest rate of 8%, well below the central bank’s key overnight lending rate of 9.25%.

The coronavirus pandemic has wreaked havoc on Egypt’s economy, particularly with the virtual shutdown since March of the country’s tourism industry, which represents about 5% of gross domestic product, and the closure of restaurants and cafes.

Meanwhile, Egypt will deduct 1% from people’s salaries for 12 months beginning on July 1 to offset the economic repercussions of the coronavirus, according to a draft law approved by the cabinet on Wednesday.

The tax will be imposed across all sectors of the economy in both the public and private sectors for net monthly salaries exceeding 2,000 Egyptian pounds ($127), the cabinet said in a statement. A tax of 0.5% will be deducted from state pensions.

The measure comes as Egypt tries to deal with the economic impact of the pandemic, which has brought tourism to a standstill, triggered major capital flight, and threatened remittances from Egyptians working overseas.

Revenues from the salary tax will be used to support organisations and workers hit by the fallout from the virus, as well as for direct support to some citizens and funding for the medical sector, the cabinet said.

Reuters