International Cooperation Minister Sahar Nasr talks during an interview in Cairo, Egypt, December 8, 2015 (Reuters)
Egypt and the World bank signed on Saturday a $1 billion loan as part of a $3 billion allocation spanning over 3 years, the International Cooperation Minister Sahar Nasr announced.
The government will receive the first tranche of the loan, amounting to $1 billion before the year's end, according to a cabinet statement.
The loan has a maturity of 35 years and carries an annual interest rate of 1.68 percent with a grace period of five years.
The minister said the loan secures economic growth and provides much-needed foreign currency liquidity to help offset the state's budget deficit.
The World bank also approved expanding Egypt's portfolio with its subsidiary the International Bank for Reconstruction and Development to $6 billion from $5 billion over the five years from 2015 to 2019, Nasr said last Thursday.
The International Finance Corporation, another member of the World Bank Group which seeks to support private sector growth, also plans $2 billion of financing over that period, according to a World Bank press release.
Egypt, which is currently experiencing a foreign liquidity crunch, requires foreign currency for imports of basic foodstuffs and raw materials for industries.
Foreign currency reserves stood at $16.44 billion at the end of November.
Egypt embarked on a politically sensitive fiscal reform programme following the election of President Abdel-Fattah El-Sisi in June 2014. The first phase of the programme saw fuel subsidy cuts, raising prices at the pump by up to 78 percent.
Egypt's economy has suffered from political turmoil since the 2011 revolution that toppled autocrat Hosni Mubarak.
Billions of dollars in financial support from Gulf Arab allies have helped keep the economy afloat.
Correction: The article was corrected to show that the loan package is $3 billion over three years not $8 billion.
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