The World Bank announced that it will lend Egypt $700 million for development policy purposes to support the government in order to increase private sector participation in economic activity, improve macroeconomic and public financial resilience, and achieve more environmentally friendly growth, according to a statement on Monday.
Loan terms
Egyptian Minister of International Cooperation Rania Al-Mashat said in a statement that the loan consists of $500 million from the World Bank and $200 million from other partners, and the repayment period is 35 years, including a five-year grace period and 30 years for repayment.
This loan comes within the framework of a program announced in March 2024 and is worth $6 billion ($3 billion for the government, and the same to enable the private sector), according to the Egyptian Ministry of International Cooperation.
This funding is the first in a series of programs that include 3 operations to “advance major reforms,” according to the statement, including strengthening the governance framework for state-owned enterprises by establishing a legal basis for the state ownership policy, strengthening the competition protection apparatus to prevent monopolistic practices in mergers and acquisitions, and enhancing revenue mobilization. Domestic by ensuring accurate assessment of wage taxes, reducing electricity grid losses, improving climate resilience and financial sustainability of the water and sanitation sectors, expanding the use of renewable energy sources, and establishing a voluntary regulatory framework for the carbon credits market.
The new development policy financing is consistent with the World Bank’s strategic partnership framework for Egypt for the fiscal years 2023-2027, which gives priority to private sector development.
Fundraising
For her part, Egyptian Minister of International Cooperation Rania Al-Mashat announced that the efforts made with multilateral and bilateral development partners over the past months resulted in the mobilization of soft financing worth approximately two billion dollars, with 700 million dollars approved by the Board of Directors of the World Bank (announced today, Monday) within Development Policy Financing Programme.
In addition, there is financing of one billion euros ($1.69 billion) from the European Union scheduled to be signed during the activities of the (Egyptian-European) investment conference under the umbrella of the “Macroeconomic Support and Budget Deficit Support Mechanism,” and soft development financing from the African Development Bank worth 131 million. Dollars, in addition to $100 million in financing from the Economic Cooperation for Development Fund, which is being finalized.
The funding from the European Union comes in implementation of the package that was announced during the Egyptian-European summit last March, worth 7.4 billion euros ($7.93 billion), where a political declaration was signed to raise joint relations to the level of a strategic partnership.
The Minister of International Cooperation stated that this is the first tranche worth one billion euros ($1.07 billion) that will be made available in the second half of 2024 after signing it during the (Egyptian-European) investment conference, out of 5 billion euros ($5.36 billion) allocated by the European Union within a mechanism. Macroeconomic and budgetary support.
The remaining tranches worth 4 billion euros ($4.28 billion) are scheduled to be made available during the period from 2025 to 2027, noting that the first tranche will be made available in the form of soft financing with long repayment terms and easy interest, and a matrix of procedures and policies will be implemented within the framework of that tranche. In order to enhance structural reform efforts in Egypt, the details of these policies are scheduled to be announced following the signing of the financing agreement.
African and Korean financing
In this context, the Ministry announced that during the annual meetings of the African Development Bank this June, an agreement worth $131 million was signed with the bank, and the duration of the financing available from the African Development Bank is 21 years, including an 8-year grace period.
The Korean Economic Development Cooperation Fund also provides Egypt with financing worth $100 million after reaching an agreement on it on the sidelines of the Korea-Africa Summit held in the South Korean capital, Seoul, this month.
The financing is managed by the African Development Bank, as it is responsible for managing the fund’s resources, in accordance with the Korea-Africa Energy and Investment Agreement, where the soft interest on financing reaches 1.5%, and the repayment period is 20 years, including a 5-year grace period.
Egypt is currently negotiating with the Asian Infrastructure Investment Bank to obtain financing worth $300 million.