Egypt will let 6 million state employees borrow against their salaries in a move designed to stimulate the economy, Al-Akhbar newspaper reported on Wednesday, citing an unnamed Ministry of Finance official.
Under the program, employees will be able to borrow up to 25 percent of their salaries as of Jan. 1 in loans that must be repaid within seven years.
"The program is a tool used by the ministry to limit the relative slowdown that has hit the markets in general. It will have a direct effect on inflation," the newspaper quoted the official as saying.
"It is one of a series of stimulus measures aimed at boosting economic activity linked to consumption and the retail sector."
After three years of around 7 percent growth, Egypt’s economy slowed when the global financial crisis hit to 4.7 percent in the 2008-2009 fiscal year, before quickening to 5.1 percent in 2009-2010.
The government believes it needs a minimum of 6 percent growth to absorb new entrants to the labor force.
The Finance Ministry has contracted with National Bank of Egypt, Banque Du Caire and Alexbank, which is controlled by the Italian bank Intesa Sanpaolo SpA, to provide the finance using the employees’ salaries as security, Al-Akhbar said.
Finance Minister Youssef Boutros-Ghali said on Monday he expected the economy to grow by 7 percent in the financial year beginning in July 2011 and by 8 to 8.5 percent the year after.
