Egypt ends tax privileges for state enterprises

Reuters/Yuri Gripas

The Egyptian cabinet has approved regulations to eliminate various tax and fee exemptions for state-owned enterprises, aligning with a condition set by the International Monetary Fund (IMF).

The cabinet approved the law in June but the executive regulations needed for implementation were recently formulated, Reuters reported.

As part of a $3 billion financial support agreement signed in December 2022, the IMF urged Egypt to level the playing field between the private and public sectors.

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The new regulations apply to all investment or economic activities undertaken by state agencies, including units of the state administrative apparatus, local administration units, national public, service and economic bodies and agencies with special budgets.

However, the regulations exclude military work and the requirements for defending the country or protecting national security.

The IMF disbursements under the 46-month programme are subject to eight reviews, the first of which was dated March 15, 2023.

IMF Middle East and Central Asia director Jihad Azour said that the fund and Egyptian authorities were discussing the impact on Egypt of the war in the Gaza Strip, and any additional funding would depend on economic reforms prioritised under the programme.

“There are negotiations between the IMF team and the Egyptian authorities now, they are making progress on these issues,” he told a media briefing.

Last month, experts told AGBI that the IMF is likely to waive its demand that the Egyptian government make the pound free floating in order to receive additional loans.

The original deal said Egypt should allow the pound “to be determined freely against other currencies”. The government has subsequently sought to increase the package to $5 billion.

The currency requirements are now likely to be relaxed, said analysts from BMI, in response to the damage done to Egypt’s economy since the start of the conflict in Gaza.