Cairo, AP—Egypt’s stock market witnessed a sharp plunge on Sunday that forced a temporary suspension of trading following reports of a newly proposed government tax on capital gains.
The half-hour suspension on the first day of the trading week at the Egyptian Exchange (EGX) failed to cool a frenzy of selling by investors. The EGX 30 benchmark index closed 4.22 percent lower, or at 7,894.7 points, continuing to slide after trading was suspended after the broader EGX 100 index fell by 5 percent.
Trading suspensions are a safety measure set up in the weeks following the 2011 uprising against longtime autocrat Hosni Mubarak to ward off what many feared would be a market collapse. The stock market closed for more than two months after the revolt.
Since the revolt, consecutive governments have struggled with shrinking revenues, drying foreign reserves and bloated public expenditures, continuously under pressure by protesters demanding higher wages and improved social services.
The current interim government and Egypt’s presumed next president, Abdel-Fattah El-Sisi, have said tough measures will be taken in the coming months to reduce a crippling budget deficit, pay off internal debts and ease unemployment, officially estimated at 13 percent. That will likely include new taxes and cuts to huge state subsidies on energy and food, though details have yet to be announced.
Egyptian Finance Minister Hani Kadri Dimian announced the new tax on capital gains on Thursday, sparking the market slide. He said the government will impose a 10 percent tax on net realized portfolio profits at the end of the year. Stock market profits are currently tax-free.
The EGX said in a statement on Sunday that the law has been sent to interim President Adly Mansour for approval. The cabinet also has drafted a new budget, with the deficit continuing to hover at around 12 percent.
The sharp drop also followed Egypt’s presidential election last week, which saw Sisi, who led the July military overthrow of Islamist President Mohammed Mursi, reportedly trounce his only competitor, leftist politician Hamdeen Sabahy. Official results are expected in the coming days.