World Bank support for Egypt

Doaa A. Moneim, Tuesday 19 Mar 2024

World Bank Country Director for Egypt, Yemen, and Djibouti, Stephane Guimbert, explained the bank’s support for Egypt’s reform programme.

Guimbert
Guimbert

 

The World Bank Group (WBG) pledged to provide Egypt with more than $6 billion in support on Monday, including $3 billion in financial support for the government’s programmes and $3 billion for the private sector, subject to board approval.

The first tranche is expected to reach Egypt before the end of the current fiscal year 2023-24, Stephane Guimbert, World Bank Country Director for Egypt, Yemen and Djibouti told Al-Ahram Weekly.

Guimbert explained that $3 billion of this commitment will be provided by the International Bank for Reconstruction and Development (IBRD), the WBG’s lending arm, and will be dedicated to supporting the country’s budget and addressing the imbalances stemming from global and regional challenges.

The remainder of $3 billion will be provided by the International Financial Corporation (IFC), the WBG’s financial arm, to support the private sector in the local market, Guimbert said.

The WBG package to support the economy will be extended over three years, and it could be disbursed as $1 billion annually until 2026 depending on the sizes of the projects it will be financing. “ We will translate this finance into a series of projects that get approved by the WBG’ Board,” Guimbert said.

Under this commitment, supporting small and medium-sized enterprises (SMEs), agriculture, better irrigation solutions, and water management are key sectors to be covered.

The bank’s actions over the next three years will focus on the pillars of its country policy framework for Egypt, which include private-sector development, human capital outcomes such as education, health, and social protection, and climate resilience, Guimbert said.

He added that the projects that Egypt is currently implementing under the Nexus of Water, Food, and Energy (NWFE) Programme will also be supported. The NWFE Programme Platform provides opportunities for mobilising climate finance and private investments to support Egypt’s green transition.

Guimbert believes the recent actions taken by the Central Bank of Egypt (CBE) to raise key interest rates and float the local currency were necessary to tame some of the imbalances in the economy. High inflation is difficult for firms and people and has impacts on food imports.

“We believe it was a very important and necessary step that the authorities took,” Guimbert said.

On 6 March, the CBE allowed market forces to determine the value of the pound on the international exchanges and raised interest rates by six per cent in an attempt to tame inflation. Annual urban inflation reached 35.7 per cent in Egypt in February.

Guimbert said that these actions are important to restore stability to Egypt’s economy, adding that economic resilience can be attained only when the country has the capability to create more job opportunities. He said that the decisions need to be watched for their impact on the most vulnerable families.

For this reason, the WBG is keen to continue working with the government on the Takaful and Karama social protection programmes that cover five million families (about 20 million people).

“It’s a very efficient way to target the people that need help most,” he said.  

Guimbert said that it is critical to leave room for the private sector to play a greater role in the economy and to create more job opportunities, especially for the middle- and low-income classes that are impacted by high inflation.

“We are very proud to be one of several important partners with Egypt, but at the end of the day, the big financing for Egypt is going to come from the private sector and from Egyptians’ own savings,” he said.

He added that financing alone will not do the trick, and that there is also the quality of the policies adopted by the government. The WBG is working with the Ministry of Finance on reorganising the budget so that there is a more integrated picture of the spending and oversight of different entities in the government.

According to Guimbert, the recent challenges witnessed by the Egyptian economy have proven the importance of remittances, exports, and tourism as key sources of dollar revenues for the country.

The WBG is also in discussion with the Micro, Small, and Medium Enterprise Development Agency (MSMEDA) to give priorities to SMEs that are exporters and help them to have easier access to credit and also the know-how of exporting and being connected to global value chains, he added.

The IFC, the World Bank’s private-sector arm, has been appointed by the Egyptian government to deliver technical support and advisory services in efforts to divest stakes in state-owned companies.

Guimbert stressed that it was important that state-owned firms are well-governed and managed and pay the same taxes as others. For those companies that the government chooses to privatise, “it is important to do it in a way that maximises benefits. You have to choose the right time.”

  “If Egypt wants to announce an IPO [initial public offering] and get good value for what is on offer, it needs to reassure investors that they are coming into a sector that is promising, that is attractive, and that has fair competition,” he said.

Guimbert said that when he was appointed WBG country director in August, he noticed that although investors were concerned about the exchange-rate situation, they had a good outlook of Egypt in the medium term because it is “a big country and a big market with a good location”.

“The private sector needs a degree of stability and predictability in the macroeconomic environment of the country,” he added.

It needs to have the confidence that it can invest and grow without fearing unfair competition. The private sector in Egypt also needs predictability and clarity on rules, Guimbert said.

Simplifying regulations on taxation and customs is important for the private sector, he stressed, adding that the government is already looking at these issues.

However, this “needs to be systematic and maintained over time to have the full impact on the private sector,” he concluded.


* A version of this article appears in print in the 21 March, 2024 edition of Al-Ahram Weekly

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