Subsidized loans to industrial, agricultural, and construction companies will be axed, Deputy Central Bank of Egypt (CBE) Governor Gamal Negm said during a cabinet meeting yesterday. Borrowers who have already taken out loans under the program will continue to benefit from the subsidized 8% interest rate. However, industry players who want to extend or borrow more under existing facilities will have to do so at prevailing interest rates, according to the statement. The central bank has informed the Federation of Egyptian Industries (FEI) and local banks of the move, Negm said.

REFRESHER- A decree issued by Prime Minister Moustafa Madbouly last week saw the CBE end support for the 8% subsidized loans. The central bank will pass responsibility for some loan programs — including mortgages, tourism industry loans, the dual-fuel vehicle replacement scheme, and loans to farmers for irrigation upgrades — to the housing, finance, and tourism ministries. The fate of loans to industry wasn’t clear until yesterday.

The Egyptian Businessmen’s Association (EBA) called the decision to end subsidized loans “surprising” — and is (unsurprisingly) less than happy about it. The EBA wasn’t notified of the move despite flagging concerns to the PM over ending the central bank’s role in the program last week, chairman Ali Eissa told Kelma Akhira’s Lamis El Hadidi (watch, runtime: 12:43). The industry body had hoped to propose setting up a fund at the Finance Ministry to help fund the loans, and phasing out the central bank’s involvement over the next five years.

Manufacturers won’t be able to afford a sudden jump in interest rates, Eissa argues. “This could cause factories to slash production…and have producers hike prices for consumers amid limited supply,” he said.

In all likelihood cheering the news? The IMF. Reports in the press had suggested in the past weeks that ending subsidized loans was one of the conditions set by the IMF for our fresh financing. The Washington-based lender argues that providing financing at below-market rates is a lever best left in the hands of fiscal policymakers and is not the purview of the folks who set monetary policy. If we want, as a nation, to offer lower rates for SMEs, certain types of corporates, women-owned businesses, et cetera, it’s going to have to come out of ministries — using tax receipts — and not via CBE policy.