A Dose too small for Egypt’s drug industry
The Egyptian government repeats its commitment to localizing pharmaceutical manufacturing in its press statements, intensifying efforts to boost specialized industries such as oncology medications. This focus comes in response to recurring crises of drug shortages in the Egyptian market, heavily reliant on imports.
However, good intentions alone are not enough. While the Ministries of Finance and Industry have launched an EGP30 billion ($972 million) initiative to provide low-cost financing for manufacturers in various fields, including antibiotics and oncology treatments, pharmaceutical producers argue that their sector’s share of the initiative will be too limited compared to the high costs of upgrading production lines.
Too little, too late
Last March, the president approved an initiative to offer subsidized financing to the industrial sector at a 15 percent interest rate, providing a lifeline for manufacturers amid the Central Bank's tight monetary policy over the past two years. This policy pushed lending rates to as high as 28.25%.
Despite the promise, the initiative remained inactive until the Ministry of Industry launched it late last year. It focuses on specific sectors the government aims to localize, such as antibiotics and oncology medications.
The Ministry of Finance will compensate banks for offering the reduced interest rates, a role previously undertaken by the Central Bank in earlier financing initiatives before the IMF prompted its cessation in 2022.
However, the Ministry of Finance appears reluctant about its new role in subsidizing low-cost financing, given the financial strain it places on the national budget amid ongoing efforts to reduce the fiscal deficit. Meanwhile, pharmaceutical manufacturers argue that capping the initiative’s total value at EGP30 billion is insufficient for supporting the industrial sector, whose total bank financing exceeds one trillion pounds ($32 billion).
“The initiative’s value should have been increased due to inflation, which has raised the costs of equipment and operating supplies,” said Tarek Abu Al-Enein, Egypt and Levant Regional Manager at Organon, in an interview with Al Manassa.
Abu Al-Enein added, “The 15% interest rate set by the initiative is still high compared to the Central Bank's previous initiative, which offered financing at only 8%. That earlier program helped many pharmaceutical companies offset losses caused by currency exchange rate fluctuations.”
Ali Ouf, head of the Pharmaceuticals Division at the Egyptian Chamber of Commerce, echoed these concerns. “We were hoping for an initiative dedicated to the pharmaceutical sector, with a value exceeding EGP50 billion ($1.62 billion) and interest rates below 15%, given the challenges companies have faced since the Central Bank’s decision to liberalize the exchange rate last March,” Ouf told Al Manassa. The decision significantly raised the cost of imported production materials, as the official exchange rate of the dollar jumped from 31 to 50 pounds.
Oncology ambitions strained
Manufacturers of oncology medications do not deem the initiative supportive of their nascent industry, which only started in Egypt a few years ago and requires significant funding to expand production lines.
“The initiative is a positive step, but each company’s share will be too small to meet the massive costs of oncology drug manufacturing,” a board member at EIPICO, a state-owned pharmaceutical company, told Al Manassa.
According to the board member, who requested anonymity, EIPICO is currently raising approximately EGP3 billion ($97 million) to build a new factory for producing complex bio-medications used to treat critical cases such as cancer, blood disorders, and infertility.
The past few years have seen significant developments in Egypt’s oncology drug sector, reflecting the government’s focus on advancing this industry. Four years ago, state-owned SEDICO Pharmaceuticals announced plans to establish the country’s first oncology drug manufacturing plant.
In 2021, the president inaugurated a large state-owned pharmaceutical industrial complex, named the Egyptian Medicine City. The following year, Swiss pharmaceutical giant Roche signed a collaboration agreement with the city, resulting in the local production of a liver cancer treatment by the end of last year.
“Localizing oncology drug manufacturing requires importing machinery which prices have skyrocketed due to the pound’s depreciation against the dollar,” another board member at SEDICO Pharmaceuticals told Al Manassa.
The second board member added that increased support could significantly reduce import costs. “So far, our company has localized five new oncology drugs, which will help cut import expenses and support export efforts.”
Dr. Ali El-Ghamrawy, head of the Egyptian Drug Authority, previously stated that the annual import bill for just eight oncology drugs amounts to $161 million.
Barriers beyond rates
High interest rates are not the only challenge facing financing. Banks often reject loan applications, viewing the pharmaceutical industry as a high-risk investment.
A credit officer at a state-owned bank explained to Al Manassa that “many banks are reluctant to finance the pharmaceutical sector due to the significant risks it faces, such as uncertainty about operating at full capacity amid recurring dollar shortages.”
The banker emphasized that this industry is highly volatile, heavily influenced by dollar exchange rates and fluctuations in the cost of imported raw materials. Meanwhile, companies must adhere to state-mandated pricing, raising concerns about their ability to meet loan repayment schedules.
Not all bankers share this skepticism. A deputy chairman of another state owned bank told Al Manassa that his institution is working to facilitate financing for the pharmaceutical sector, recognizing it as a vital industry that must operate without interruption under all circumstances.
(*)A version of this article first appeared in Arabic on January 21, 2025