In this week&rsquo;s edition, we discuss the repercussions of the debit card suspension decision and provide insight into Egypt&rsquo;s rent freeze laws&nbsp;
<hr>
<h2 dir="ltr">Suspending the Use of Debit Cards: Problem or Solution?</h2>
The Central Bank of Egypt (CBE) <a href="https://www.asharqbusiness.com/article/55384/%D8%A7%D9%84%D9%85%D8%B1%D9%83%D8%B2%D9%8A-%D8%A7%D9%84%D9%85%D8%B5%D8%B1%D9%8A-%D9%8A%D9%88%D8%AC%D9%87-%D8%A7%D9%84%D8%A8%D9%86%D9%88%D9%83-%D8%A8%D9%88%D9%82%D9%81-%D8%A7%D8%B3%D8%AA%D8%AE%D8%AF%D8%A7%D9%85-%D8%A8%D8%B7%D8%A7%D9%82%D8%A7%D8%AA-%D8%A7%D9%84%D8%AE%D8%B5%D9%85-%D9%81%D9%8A-%D8%A7%D9%84%D8%AE%D8%A7%D8%B1%D8%AC">instructed</a> banks operating in Egypt to suspend the use of debit cards for foreign transactions and limit the use of the cards to Egypt starting <a href="https://cnnbusinessarabic.com/banking-finance/39392/%D9%85%D8%B5%D8%B1-%D8%AA%D9%88%D9%82%D9%81-%D8%A7%D9%84%D8%B3%D8%AD%D8%A8-%D8%A8%D8%A8%D8%B7%D8%A7%D9%82%D8%A7%D8%AA-%D8%A7%D9%84%D8%AE%D8%B5%D9%85-%D8%AE%D8%A7%D8%B1%D8%AC-%D8%A3%D8%B1%D8%A7%D8%B6%D9%8A%D9%87%D8%A7-%D9%84%D9%85%D9%83%D8%A7%D9%81%D8%AD%D8%A9-%D8%B4%D8%AD%D9%91-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D8%A7%D8%B1">October 9</a>. Payment methods for transactions outside Egypt were limited to <a href="https://arabic.arabianbusiness.com/abnews/%D9%85%D8%B5%D8%B1-%D8%AA%D9%88%D9%82%D9%81-%D8%A8%D8%B7%D8%A7%D9%82%D8%A7%D8%AA-%D8%A7%D9%84%D8%AE%D8%B5%D9%85-%D8%A7%D9%84%D9%85%D8%A8%D8%A7%D8%B4%D8%B1#:~:text=%D8%A8%D8%A7%D8%B4%D8%B1%D8%AA%20%D8%A7%D9%84%D8%A8%D9%86%D9%88%D9%83%20%D8%A7%D9%84%D9%85%D8%B5%D8%B1%D9%8A%D8%A9%20%D9%88%D9%82%D9%81%20%D8%A7%D9%84%D9%85%D8%B9%D8%A7%D9%85%D9%84%D8%A7%D8%AA%20%D8%A7%D9%84%D8%AF%D9%88%D9%84%D9%8A%D8%A9%20%28%D8%A7%D9%84%D8%B3%D8%AD%D8%A8%20%D8%A7%D9%84%D9%86%D9%82%D8%AF%D9%8A,%D8%A7%D9%84%D9%86%D9%82%D8%AF%20%D8%A7%D9%84%D8%A3%D8%AC%D9%86%D8%A8%D9%8A%D8%8C%20%D9%83%D9%85%D8%A7%20%D8%B0%D9%83%D8%B1%D8%AA%20%D9%88%D8%B3%D8%A7%D8%A6%D9%84%20%D8%A5%D8%B9%D9%84%D8%A7%D9%85%20%D9%85%D8%B5%D8%B1%D9%8A%D8%A9%20%D8%A7%D9%84%D9%8A%D9%88%D9%85.">credit cards</a> and cards connected to dollar and other foreign currency accounts.
Although the CBE&rsquo;s decision is expected to reduce the withdrawals for consumer purchases and eliminate operations abroad to convert Egyptian pounds to dollars, it does not take into account startups and sole proprietorships whose businesses depend on debit cards for foreign transactions. In addition, Egypt may see an upswing in the black market, as business owners turn to it to meet their need for dollars.&nbsp;
<h3 dir="ltr">Why suspend debit cards but not credit cards?&nbsp;</h3>
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697379840imageCopy of Ed. 43_Topic2 1 copy.png" alt="" width="546" height="464">
Debit cards are more prevalent than credit cards in Egypt, and the combined account balance of debit card holders is higher than that of credit cards holders, explaining why the use of the latter was not suspended.
The CBE&rsquo;s decision is part of a raft of measures to save dollars in light of the severe dollar shortage and decline in various dollar-based revenues. The decision coincides with Moody&rsquo;s move to <a href="https://www.skynewsarabia.com/business/1659361-%D9%85%D9%88%D8%AF%D9%8A%D8%B2-%D8%AA%D8%AE%D9%81%D8%B6-%D8%AA%D8%B5%D9%86%D9%8A%D9%81-%D9%85%D8%B5%D8%B1-b3-caa1">downgrade</a> Egypt&rsquo;s credit rating from B3 to Caa1, indicating a higher risk of investing in debt instruments. The government therefore needs to reduce the demand for foreign currency to avoid exacerbating the currency crunch at a time when its debts are coming due. Kristalina Georgieva, the managing director of the International Monetary Fund, <a href="https://www.asharqbusiness.com/article/55384/%D8%A7%D9%84%D9%85%D8%B1%D9%83%D8%B2%D9%8A-%D8%A7%D9%84%D9%85%D8%B5%D8%B1%D9%8A-%D9%8A%D9%88%D8%AC%D9%87-%D8%A7%D9%84%D8%A8%D9%86%D9%88%D9%83-%D8%A8%D9%88%D9%82%D9%81-%D8%A7%D8%B3%D8%AA%D8%AE%D8%AF%D8%A7%D9%85-%D8%A8%D8%B7%D8%A7%D9%82%D8%A7%D8%AA-%D8%A7%D9%84%D8%AE%D8%B5%D9%85-%D9%81%D9%8A-%D8%A7%D9%84%D8%AE%D8%A7%D8%B1%D8%AC">warned</a> in early October that Egypt would deplete its foreign currency reserves unless it devalued the pound.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697379869imageCopy of Ed. 43_Topic2 1 copy 3.png" alt="" width="546" height="464">
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697380600imageCopy of Ed. 43_Topic2 1 copy 4.png" alt="" width="546" height="464">
<h3 dir="ltr">Does the decision solve the problem?</h3>
The decision will reduce withdrawals from abroad via card transactions&mdash;estimated at <a href="https://cbe.org.eg/ar/payment-systems-and-services/payment-services/payment-cards">23.8 million</a> in 2022&mdash;thereby stemming one outward stream of foreign currency. <a href="https://www.cbe.org.eg/-/media/project/cbe/page-content/rich-text/bop/october-2023/%D8%A7%D9%84%D8%A8%D9%8A%D8%A7%D9%86-%D8%A7%D9%84%D8%B5%D8%AD%D9%81%D9%89-%D8%A8%D8%B4%D8%A3%D9%86-%D8%A3%D8%AF%D8%A7%D8%A1-%D9%85%D9%8A%D8%B2%D8%A7%D9%86-%D8%A7%D9%84%D9%85%D8%AF%D9%81%D9%88%D8%B9%D8%A7%D8%AA-%D8%AE%D9%84%D8%A7%D9%84-%D8%A7%D9%84%D8%B3%D9%86%D8%A9-%D8%A7%D9%84%D9%85%D8%A7%D9%84%D9%8A%D8%A9--2022--2023.pdf">Travel payments</a>, including payments via debit card, reached USD5 billion last fiscal year. Travel payments is an item in the services balance, part of the balance of payments, referring to the <a href="https://cnnbusinessarabic.com/economy/11694/%d9%85%d9%8a%d8%b2%d8%a7%d9%86-%d8%a7%d9%84%d9%85%d8%af%d9%81%d9%88%d8%b9%d8%a7%d8%aa-%d8%a7%d9%84%d9%85%d8%b5%d8%b1%d9%8a-%d9%85%d8%a7-%d8%a7%d9%84%d8%b0%d9%8a-%d8%aa%d8%ae%d8%a8%d8%b1%d9%86%d8%a7">value</a> of expenditures on goods and services by people who travel outside Egypt for a specific period of time. The CBE has also <a href="https://arabic.cnn.com/business/article/2022/12/26/central-bank-of-egypt-transactions-foreign-currency">observed</a> withdrawals abroad by card holders who had not physically left the country. The decision will thus put a stop to such methods of obtaining dollars.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697379926imageCopy of Ed. 43_Topic2 1 copy 2.png" alt="" width="546" height="464">
At the same time, however, the decision will lead to complications. It will <a href="https://www.facebook.com/story.php?story_fbid=pfbid02SfDoEqda6Zz9YKubdwB7TZN8QnJfhTvqyDkSCf9H7RmRaKQJJcBVXeEoohdK6bGnl&amp;id=100063541037670&amp;mibextid=Nif5oz&amp;paipv=0&amp;eav=AfZ2sZhFuAdmFKfegABg2-RzN5Fc03sRuQgNco1X55Hk4nvwem3xF_yO74gW5ICNn80&amp;_rdr">disrupt</a> payments by startups to their clients abroad, <a href="https://www.masrawy.com/news/news_economy/details/2023/10/10/2479275/%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA-%D8%A7%D9%84%D9%86%D8%A7%D8%B4%D8%A6%D8%A9-%D9%88%D8%A3%D8%B5%D8%AD%D8%A7%D8%A8-%D8%A7%D9%84%D8%B9%D9%85%D9%84-%D8%A7%D9%84%D8%AD%D8%B1-%D9%8A%D9%88%D8%A7%D8%AC%D9%87%D9%88%D9%86-%D8%A3%D8%B2%D9%85%D8%A9-%D8%A8%D8%B9%D8%AF-%D9%88%D9%82%D9%81-%D8%A8%D8%B7%D8%A7%D9%82%D8%A7%D8%AA-%D8%A7%D9%84%D8%AE%D8%B5%D9%85#:~:text=%D8%AA%D9%88%D8%A7%D8%AC%D9%87%20%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA%20%D8%A7%D9%84%D9%86%D8%A7%D8%B4%D8%A6%D8%A9%20%D9%88%D9%84%D8%A7%D8%B3%D9%8A%D9%85%D8%A7%20%D8%A7%D9%84%D8%B5%D8%BA%D9%8A%D8%B1%D8%A9%20%D9%85%D9%86%D9%87%D8%A7%20%D8%A3%D8%B2%D9%85%D8%A9%20%D9%85%D9%84%D8%AD%D9%88%D8%B8%D8%A9,%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA%20%D8%A8%D8%A7%D9%84%D8%B4%D9%84%D9%84%20%D8%A7%D9%84%D8%AA%D8%A7%D9%85%D8%8C%20%D9%88%D9%81%D9%82%D8%A7%20%D9%84%D9%85%D8%B5%D8%A7%D8%AF%D8%B1%20%D8%A8%D8%B3%D9%88%D9%82%20%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA%20%D8%A7%D9%84%D9%86%D8%A7%D8%B4%D8%A6%D8%A9.">threatening</a> to bring some of their activities to a standstill. These firms rely on dollars for many of their services, including digital marketing campaigns on social media platforms, the purchase of certain technical services offered by foreign companies, and subscriptions to software programs that are crucial to their work. These threats <a href="https://almalnews.com/%d8%ba%d8%b1%d9%81%d8%a9-%d8%b5%d9%86%d8%a7%d8%b9%d8%a9-%d8%aa%d9%83%d9%86%d9%88%d9%84%d9%88%d8%ac%d9%8a%d8%a7-%d8%a7%d9%84%d9%85%d8%b9%d9%84%d9%88%d9%85%d8%a7%d8%aa-%d9%88%d8%a7%d9%84%d8%a7%d8%aa/">prompted</a> the Information Technology and Communication Chamber to request a meeting with the CBE governor to discuss the severity of the decision for the industry. There were 677 <a href="https://www.almasryalyoum.com/news/details/2775465">official startups</a> in Egypt in 2022 <a href="https://www.youm7.com/story/2022/12/23/%D8%A7%D9%84%D8%AA%D8%AE%D8%B7%D9%8A%D8%B7-677-%D8%B4%D8%B1%D9%83%D8%A9-%D9%86%D8%A7%D8%B4%D8%A6%D8%A9-%D9%81%D9%89-%D9%85%D8%B5%D8%B1-%D8%AA%D9%88%D9%81%D8%B1-%D8%A3%D9%83%D8%AB%D8%B1-%D9%85%D9%86-45/6019869#:~:text=%D9%83%D8%AA%D8%A8%D8%AA%20%D8%A3%D8%B3%D9%85%D8%A7%D8%A1%20%D8%A3%D9%85%D9%8A%D9%86%20%D9%82%D8%A7%D9%84%D8%AA%20%D8%A7%D9%84%D8%AF%D9%83%D8%AA%D9%88%D8%B1%D8%A9%20%D8%BA%D8%A7%D8%AF%D8%A9%20%D8%AE%D9%84%D9%8A%D9%84%D8%8C%20%D9%85%D8%AF%D9%8A%D8%B1,%D9%85%D8%AD%D9%84%D9%8A%D8%A7%20%D9%88%D8%B9%D8%A7%D9%84%D9%85%D9%8A%D8%A7%206.20%25%20%D9%85%D9%86%20%D8%A5%D8%AC%D9%85%D8%A7%D9%84%D9%8A%20%D8%B9%D8%AF%D8%AF%20%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA%20%D8%A7%D9%84%D9%86%D8%B4%D8%B7%D8%A9.">employing 45,000</a> people.
The decision also threatens the operations of some 1,000 small and medium enterprises in the information technology sector, which is made up of about 3,000 companies that provide 200,000 jobs, according to engineer Khaled Ibrahim, the head of the Information Technology Chamber in the Federation of Egyptian Industries. On average, a company in this sector makes payments of USD7,000 a month using debit cards, or USD84,000 per year. All told, external debit card payments by firms in the sector come to USD84 million annually.
<hr>
<h2 dir="ltr">Old Rent Law: Toward a Fair Revision for All</h2>
At the Story of a Nation conference <a href="https://www.sis.gov.eg/Story/187050/President-El-Sisi-attends-%E2%80%9CStory-of-Homeland%E2%80%9D-2023-Conference?lang=en-us">held</a> from September 30 to October 2, President Abdel Fattah El-Sisi <a href="https://english.ahram.org.eg/NewsContent/1/1235/509399/Egypt/Urban--Transport/Sisi-urges-parliament-and-media-to-discuss-old-ren.aspx">called</a> for a reconsideration of the Nasser-era rent-control law&mdash;known as the old rent law&mdash;and a new vision for change. Some 2 million residential units, valued at an estimated EGP1 trillion, are covered by the law, and their off-market status represents a considerable economic loss.
The president&rsquo;s statement was <a href="https://english.ahram.org.eg/NewsContent/1/1235/509399/Egypt/Urban--Transport/Sisi-urges-parliament-and-media-to-discuss-old-ren.aspx">welcomed</a> by <a href="https://www.elwatannews.com/news/details/6838090">property owners</a> whose rents are capped under the 1962 law. In expensive residential areas such as Zamalek, Garden City, Downtown, and Heliopolis, monthly rents for properties covered by the law <a href="https://english.ahram.org.eg/NewsContent/1/1235/509399/Egypt/Urban--Transport/Sisi-urges-parliament-and-media-to-discuss-old-ren.aspx">range</a> from EGP17 to EGP30.
The issue has been raised in the past, and a joint governmental parliamentary committee was <a href="https://english.ahram.org.eg/NewsContent/1/1235/509399/Egypt/Urban--Transport/Sisi-urges-parliament-and-media-to-discuss-old-ren.aspx">formed</a> in 2021 to reevaluate the old rent law. The committee first turned its attention to non-residential units, but its work has yet to result in any amendment to the law.
<h3 dir="ltr">The Old Rent Law: Egypt is not Unique, but it is Exceptional</h3>
Egypt is not a unique case. <a href="https://fount.aucegypt.edu/etds/2070/">Rent stabilization policies</a> have been enacted around the world since the Second World War in an attempt to solve housing crises in particular periods and protect tenants against prices on the open market.
But although Egypt is not a unique case in this respect, the persistence of absolute rent caps for so long and the ability to inherit rent-control units at their capped price is exceptional.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697380697imageCopy of Ed. 43_Topic1 En 1.png" alt="" width="546" height="464">
<h3 dir="ltr">International Experiences in Moving Away from Rent Freezes</h3>
Policies capping rent <a href="https://www.nuwireinvestor.com/rent-control-pros-and-cons/">reduce</a> the profit incentives for real estate owners and contractors, which has adverse impacts on maintenance, leading to the disrepair and dilapidation of properties.
Accordingly, in the 1990s many governments <a href="https://www.brookings.edu/articles/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/">began to abandon</a> caps on rent and <a href="https://www.lse.ac.uk/business/consulting/assets/documents/assessing-the-evidence-on-rent-control-from-an-international-perspective.pdf">replace</a> them with different systems. Tunisia, Pakistan, and the Philippines instituted fixed-rate limits on rent increases, while France, Italy, and other European countries set ceilings on rent hikes based on a fraction of construction costs; countries like <a href="https://www.lse.ac.uk/business/consulting/assets/documents/assessing-the-evidence-on-rent-control-from-an-international-perspective.pdf">Canada</a> combine these two systems. In contrast, Taiwan and Costa Rica set a cap on monthly rents, but this <a href="https://www.nuwireinvestor.com/rent-control-pros-and-cons/">led</a> to a gradual decline in the actual value of rents over the years.&nbsp;&nbsp;
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697380727imageCopy of Ed. 43_Topic1 En 2.png" alt="" width="456" height="387">
<h3 dir="ltr">Toward an Incremental, Fair Revision of the Old Eent Law</h3>
1. Fair application: Most residents of rent-controlled units, especially the elderly and pensioners, cannot bear drastic <a href="https://english.ahram.org.eg/NewsContent/50/1208/462499/AlAhram-Weekly/Features/Rent-laws-in-review.aspx">increases</a> in the cost of housing. A gradual, equitable rent adjustment will thus <a href="https://jur.journals.ekb.eg/article_88588.html">spare</a> Egypt the fate of the Malaysian city of George Town, when the government embarked on an abrupt, complete liberalization of rental prices. The social rights of residents, especially the poorest, were neglected, leading them to progressively move out of the city due to high rents.
2. Insuring that rents and annual rent increases are proportionate to income: One of the most significant obstacles to <a href="https://jur.journals.ekb.eg/article_88588.html">amending</a> the old rent law is that wages have remained stable and salary increases are inadequate to cope with the pressures of current economic conditions and high inflation. This is especially true of civil servants, who <a href="https://jur.journals.ekb.eg/article_88588.html">constitute</a> a large proportion of the beneficiaries of rent control.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1697380789imageCopy of Ed. 43_Topic1 En 3.png" alt="" width="546" height="464">
3. Moving from rent caps to a controlled, flexible rent system: This can be achieved through <a href="https://documents-dds-ny.un.org/doc/UNDOC/GEN/N13/421/84/PDF/N1342184.pdf?OpenElement">organized processes</a> that regulate rental units. Property owners will benefit from the periodic updating of the value of residential units and the establishment of specific lease terms; the law should also specify cases in which tenants may not be evicted.
4. <a href="https://jur.journals.ekb.eg/article_88588.html">Lifting</a> all rental caps from legacy units that have been unoccupied for years: Such units will yield economic benefits when they are either sold or re-leased, or, in the case of dangerous, dilapidated buildings, removed pursuant to existing demolition orders.
<hr>
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"Adasa" is a weekly policy digest by Alternative Policy Solutions. "Adasa" provides an analysis of a select number of policy developments and their effect on inclusive development and socioeconomic change.

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وقف استخدام بطاقات الخصم المباشر.. حل أم مشكلة؟

Suspending the Use of Debit Cards.. Problem or Solution?

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