The Central Bank of Egypt (CBE) announced an initiative this week that could help support the unstable tourism industry, one of the country's top earners of foreign currency and contributors to GDP. The CBE declared in a press statement that it had decided to give greater credit facilities to clients investing in establishing tourism projects including hotels, recreational activities in tourist areas, transportation, restaurants, booking services and tours. The bank also said that it had issued guidelines designed to help local banks deal with the debt repayment problems of existing projects and to take decisions accordingly. The guidelines included the granting of a further one-year grace period in addition to the existing one, during which further interest payments would be delayed without the imposition of penalties. Tourism has been one of the hardest hit sectors of the economy since the 25 January Revolution. Although tourism arrivals in 2012 saw 17 per cent growth on the 9.8 million who arrived in 2011 and a 13 percent growth in income on the $8.8 billion of 2011 revenues, they remained below the record 2010 figures of 14.5 million visitors and $12.5 billion in revenues. The CBE said that clients working in the tourism industry should be evaluated on the effects of the current economic slowdown on their ability to repay debts, as well as on expected short and long-term financial flows that could cover their debts. It recommended debt restructuring to extend repayment periods for clients. According to Ahmed Adam, a banking expert, the CBE's initiative should help to boost the tourism sector and assist other sectors that depend directly or indirectly on tourism. Adam said that the initiative could also be a way for banks to recoup debts from clients suffering from lower incomes as a result of the drop in tourism. “It is a good opportunity for tourism companies to catch their breath, because they have been stressed by their inability to repay debts and the associated late interest payments,” he said. Ibrahim Kamal, the manager of a tourism company, agreed with Adam and praised the CBE initiative, which could help companies reevaluate their market positioning and give them the chance to settle their debts. “We needed this kind of support,” he said. Adam said that efforts should be made to shift the economy away from a reliance on tourism, since this was a sensitive industry that was easily affected by local or international shocks such as the Arab Spring revolutions and the global financial crisis. The CBE said that “tourism is without doubt one of the main pillars of the Egyptian economy and a top earner of foreign currency. Hardships suffered by this vital sector demand support from the national banking system in order to help revive it.”
