World Bank President Robert Zoellick stresses all-inclusive growth and jobs (Photo: Reuters)
World Bank President Robert Zoellick on Tuesday unveiled US$6 billion in new funding for Tunisia and Egypt to help them transform their economies and attract investment in the aftermath of mass protests.
Under the plans, $4.5 billion of loans would be available to Egypt over the next two years.
Zoellick said a meeting of Group of Eight industrial powers in Deauville, France, starting on Thursday, will discuss transitions sweeping the Middle East and North Africa.
He said it was important financial support translates into all-inclusive growth, less corruption and jobs.
The World Bank package includes budget support as well as lending to shore up the private sector and encourage new investment
through political insurance coverage.
"My primary interest is to try to help these countries undertake the reforms that get them back to market," Zoellick told a conference call.
Zoellick said the G8 could help by promoting foreign direct investment and trade with countries in the region.
The World Bank is working closely with the IMF, which is overseeing a separate funding package focused on stabilizing the economy, and budget and reserve shortfalls, he said.
An IMF mission is currently in Egypt looking at financing needs. Egyptian government officials have estimated a $10-12 billion funding gap over the next two years amid a sharp drop in revenue from tourism and investment.
The World Bank on Tuesday cut its 2011 forecasts for growth in the Middle East and North Africa to 3.6 per cent -- below the 5 per cent it previously projected for the year.
For Egypt, the World Bank plans to lend $4.5 billion over the next 24 months, including $1 billion this year in budget support and another $1 billion next year, depending on how far political and economic reforms have advanced.
The remaining $2.5 billion will be invested in development projects in Egypt, lending to support the private sector, and political risk guarantees.
Egypt has drawn down its net international reserves by $6 billion to finance a balance of payments gap exasperated by the political turmoil. Reserves in May stood at $28 billion, enough to cover imports for 4.5 months, according to economists.
For Tunisia, the World Bank plans $1 billion in support for the budget and investment projects, beyond the $500 million already announced to help the government, Zoellick added.
In addition, the World Bank plans to lend up to $400 million for private-sector investments and another $100 million in political insurance coverage. He said the funding will be disbursed following World Bank board approval next month.
He noted that Tunisia's interim government was dealing with the cost of an estimated 50,000 refugees fleeing the conflict in neighboring Libya, with only 6,000 to 7,000 in U.N. camps.
A World Bank report on Tuesday said the region needs about 50 million to 75 million jobs over the next decade to absorb new labor market entrants and reduce unemployment.
"If growth and the employment response to growth remain close to the experience of the past decade, the region will add about 4.8 million jobs this year, or 48 million between 2011 and 2020," the report said.
The report emphasized that the region needs to restore investor confidence and attract both domestic and foreign investment, starting with legal and regulatory reforms, and credible policies that ensure a break with past practices.
The report called for "timely external support".