The Central Bank of Egypt (CBE) resolved the problem of the temporary facilities obtained by companies from banks in foreign currency, the values of which have increased following the flotation of the pound as a result of the currency price differences, according to Gamal Negm, deputy governor of the CBE.
Negm told Daily News Egypt that banks will obtain a 3.62% return on debt from companies that owe more than $5m and have annual sales worth EGP 500m.
Those companies will receive a return of 13.75% compared to the domestic liquidity, which will cover those debts that are estimated at 110% of the size of indebtedness.
The CBE granted $420m to settle the position of companies that owe debts worth $5m and have annual sales worth more than EGP 500m, with banks to schedule the indebtedness of these companies over two to seven years at an interest rate of 12%.
The CBE earlier allowed banks—prior to the flotation of the pound—to provide customers with temporary facilities in foreign currency to cover their imports and to obtain liquidity in local currency to cover the value of these facilities by 110%.
The Egyptian Union for Investors Associations estimated the total value of debts at $1.9bn.
It has been speculated that a meeting will be held soon between Negm and heads of the Egyptian Union for Investors Associations to discuss the mechanism of benefits of companies that owe debts of more than $5m from the initiative of the CBE, but Negm denied that.
According to a senior banker who preferred anonymity, the CBE supported companies that owe debts of $5m to help those companies to overcome the negative consequences of the flotation of the pound, especially regarding the weakness of the financial centres of these companies, which may not be able to bear the consequences of such a decision.
He added that the CBE also eased the burdens on other companies with debts of more than $5m, through reducing the interest on debts and providing them a higher return on liquidity deposited in local currency for covering debts on the other hand.
He noted that the interest rate difference will help these companies to cover the value of their own debts in banks.
Some companies have covered 110% of their debts; while other companies have not covered their debts so far.