Egypt receives second $1bn portion of World Bank loan

The World Bank’s board of executive directors has approved a second $1 billion disbursement of a $3 billion loan package to Egypt, a statement from the World Bank Group said on Tuesday.

The statement added that the loan aimed at supporting Egypt’s economic reform programme, which the government has been adopting.

Reuters quoted the World Bank country director for Egypt, Yemen and Djibouti Asad Alam saying: “We are pleased to continue supporting the country’s [Egypt] ambitious program of reforms with a strong focus on job creation and boosting the competitiveness of Egyptian businesses”.

Alam added that the current portfolio of the World Bank in Egypt includes 25 projects for a total commitment of about $8.5 billion.

“The WB’s approval is regarded as a certification of trust for the state’s economic reforms programme, especially after the reception of the African Development Bank’s second tranche of the $1.5 billion three-year finance programme,” Minister of International Cooperation Sahar Nasr said in the statement.

Last September, Egypt received the first tranche of the loan, worth $1 billion. The loan’s third chunk is expected to follow later in 2017.

Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolt and to ease a dollar shortage that has crippled import activity and hampered recovery, according to Egypt Independent.

Last November, Egypt won International Monetary Fund (IMF) loan for a three-year, $12 billion bailout programme aimed at reviving a struggling economy, bringing down public debt and controlling inflation while seeking to protect the poor. An initial loan tranche of $2.75 billion was disbursed to Egypt’s central bank, while the remainder will be phased in over the next three years subject to five reviews on required reforms, according to Reuters.

The government has also obtained two portions, worth $1 billion, of a $1.5 billion loan from the African Development Bank (AfDB). The loan was considered part of a comprehensive programme for economic development, and to support the state budget with $1.5 billion.

Last year, Egyptian finance ministry borrowed 7.5 billion Egyptian pounds (around $970 million) in treasury bills, in addition to deposits worth billions of dollars from the Gulf states. Treasury bills are short-term securities with a maturity term that varies between 3 to 6 months.

Economists have described the Egyptian government’s external debt as “unprecedented”, warning of a future aggravating financial burden. They pointed out that the government approach of attracting investments based on receiving these loans is not a guarantee towards eventually paying back these loans, stressing that the government must implement real, game-changing reforms.

Daily News Egypt quoted experts sayingthat Egypt is falling into a trap that previously affected the nation in the 1980s, when the country started to borrow from international sources hoping to develop economic conditions; however, Egypt did not attract investment and was saddled with debt. Egypt’s external debt easily would cross $100bn within 2-3 years if the rate of borrowing remains as it is now, experts reiterated.

Since the beginning of last year, Egypt has embarked on a plan to introduce a number of fiscal reforms, including fuel subsidy cuts that increased prices up to 78 percent, as well as imposing new taxes to ease a growing budget deficit that is currently estimated at 12.2 percent of the GDP.