Egypt Mobilizes $2 Bln in Budget Support from Ifis And Partners to Support Structural Reforms

Egypt has mobilized $2 billion in financings over the past few months, following negotiations with International Financial Institutions (IFIs) and multilateral and bilateral development partners, Minister of International Cooperation Rania Al-Mashat announced in a statement.

The mobilized finances focus on advancing the government’s economic and structural reform program, mobilizing budget support, strengthening macro-fiscal resilience, improving competitiveness, and promoting the implementation of the State Ownership Policy (SOP) document.

Underpinning the budget support programs with the various development partners are three pillars of reform: enhancing the competitiveness of the Egyptian economy and improving the business environment, building macroeconomic resilience and stability, and supporting green transition.

Al-Mashat explained that these efforts resulted in mobilizing development financing worth approximately $2 billion, including €1 billion ($1.069 billion) from the European Union scheduled to be signed during the Egypt – EU Investment Conference under the umbrella of the Macro-Financial Assistance (MFA).

The two-day conference kicks off on Saturday.

Furthermore, Egypt will receive an additional $700 million approved by the World Bank’s Board of Directors within the Development Policy Financing program. Egypt will also receive concessional development financing from the African Development Bank (AfDB) worth $131 million and financing worth $100 million from the Korea Economic Development Co-operation Fund (EDCF).

Egypt engages in an Extended Fund Facility (EFF) loan programme worth $8 billion, which focuses mainly on levelling the field between the public and private sectors to reduce the state's footprint in the country's economy.

Under the programme, Egypt is also committed to divesting from a group of state-owned assets.

Fifty percent of the proceeds of the sales of these assets will be dedicated to containing the high level of debt that hit 98 percent of GDP in the last FY2022/2023.

Development Policy Financing (DPF) with the World Bank Within the framework of this program, the World Bank approved on 21 June financing worth $700 million: $500 million from the World Bank and $200 million from other partners.

The loan period is 35 years, including a five-year grace period and 30 years to repay at the secured overnight financing rate (SOFR) interest rate.

This aligns with the World Bank's announcement, in March, of $6 billion available to support economic and structural reform efforts in Egypt over three years. The funding will be split between the government and the private sector so that each receives $3 billion.

In this respect, Al-Mashat said that some policies have been implemented with the DPF in coordination with the World Bank and eight other national entities, including the Ministries of Finance, Housing, Justice, Electricity, the Competition Protection Authority, and the Information and Decision Support Centre of the Council of Ministers.

The policies aim to achieve three key objectives: enhancing the economy's competitiveness, building macroeconomic resilience and stability, and supporting green transition.

Macro-Financial Assistance (MFA) with the EU The upcoming agreement with the EU marks a significant milestone in Egyptian-European relations under President Abdel-Fattah El-Sisi's leadership, following the €7.4 billion deal announced during the Egyptian-European Summit last March, according to Al-Mashat.

The first €1 billion tranche, to be disbursed in 2024, is part of €5 billion allocated for macroeconomic and budget support from 2024-2027. It will feature soft financing terms, including extended repayment periods and favourable interest rates. Details of the associated structural reform policies will be announced during the conference.

African Development Bank (AfDB) Financing In the same context, during her visit to Nairobi, Kenya, for the annual meetings of the African Development Bank (AfDB), Al-Mashat announced signing a $131 million agreement to catalyze private sector investments, facilitate economic diversification, and support green transformation.

The financing from AfDB spans 21 years, including an eight-year grace period.

Funding from the Korea Economic Development Co-operation Fund (EDCF).

Moreover, procedures are underway with the Korea Economic Development Cooperation Fund (EDCF) to greenlight a $100 million financing agreement following the Minister of International Cooperation's participation in the Korea-Africa Summit in Seoul.

The concessional financing features a 1.5 percent interest rate and a 20-year repayment period, including a five-year grace period.

Furthermore, the Ministry of International Cooperation continues to engage with development partners to secure additional concessional financing.

Current negotiations with the Asian Infrastructure Investment Bank (AIIB) aim to secure $300 million in financing to support Egypt's structural reform efforts.