March 17, 2020 / 6:38 PM / 13 days ago

UPDATE 1-Egypt cuts dividend tax and energy prices to soften coronavirus impact

(Adds detail, background, analyst comment)

CAIRO, March 17 (Reuters) - Egypt is reducing energy prices for industrial users and cutting the tax on company dividends, it said on Tuesday, as part of measures to soften the economic impact of the coronavirus.

The coronavirus outbreak threatens to devastate the country’s $12.5 billion-a-year tourism industry and could put pressure on revenue from trade, natural gas exports and worker remittances from abroad.

The country, which has registered 196 cases of coronavirus so far, will ban most international airline travel for two weeks, starting on Thursday.

Egypt’s main share index, the EGX30, has lost nearly a third of its value over the past four weeks on concern over the threat to the economy.

“The package of decisions taken by the government reflects its determination to quickly support the industrial sector and confront current repercussions,” a cabinet statement quoted Prime Minister Mostafa Madbouly as saying.

Egypt will lower the price of natural gas for industrial use to $4.50 per mmbtu, the statement said. It had previously been charging $5.50, according to economists.

The government will also reduce the price of electricity to heavy industry to 0.10 Egyptian pounds ($0.0064) per kilowatt hour, down from 1.10 pounds, and leave electricity prices for other industries stable for three to five years.

Egypt had been raising electricity prices annually over the past few years, with the ultimate goal of removing all subsidies.

Allen Sandeep, head of research at Naeeem Brokerage, said the government had accomplished this early, having already eliminated most subsidies on both electricity and gas.

The measures would not go against commitments made with the International Monetary Fund in 2016 under a three-year economic reform programme, he said.

The government was also cutting a tax on dividends for companies listed on its stock exchange by half to 5% and lowering a stamp duty on stock market transactions, the statement said.

Egypt will also make 1 billion Egyptian pounds available to exporters for March and April for export subsidies and postpone tax payments for three months on real estate owned by factories and tourism companies.

The government also announced on Tuesday that it is shutting cinemas and theatres until further notice to prevent the spread of the virus.

On Monday the central bank cut its main interest rates by 300 basis points at an unscheduled meeting, describing it as a “pre-emptive” move to support the economy. ($1 = 15.7000 Egyptian pounds) (Reporting by Moamen Saeed Atallah, Omar Fahmy and Ehab Farouk; Writing by Nadine Awadalla and Patrick Werr Editing by Gareth Jones and David Goodman)

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