Malinne Blomberg, the resident representative of the African Development Bank (AfDB) in Egypt, told Ahram Online about the bank’s measures to ameliorate the coronavirus’ economic impacts on the continent, and on discussions with Egypt to benefit from the bank’s financing.
She also stressed the strength of the Egyptian economy and its ability to overcome the crisis.
Ahram Online (AO): What is the role of the African Development Bank in supporting member states in facing the coronavirus pandemic, and how much funding has been provided?
Malinne Blomberg (MB): The coronavirus disease is manifesting itself in a global health crisis unlike anything we have seen in modern times. It has already upended the lives of millions across the globe, including the African continent.
Urgent and quick actions are taken to save and protect millions of lives in Africa and we appreciate the swift and strong measures taken to date by the government of Egypt to combat the pandemic and to protect the most vulnerable during these difficult times.
In light of the resource requirements to deal with this unprecedented crisis that are compounded by an unprecedented drop in oil prices, reduced tourism revenues, a fall in remittances, and slow-down of economic activities, the African Development Bank is undertaking all efforts to maximise its financial capacity to provide support to all African countries in a manner that responds to the specificities of each country in the course of the coming months.
Cognisant of the scale of the challenge and the limited resources available, we are also working closely with other international financial institutions in this regard.
The African Development Bank is fully deploying its arsenal of emergency response support to assist all African countries to mitigate the severe economic and social impact of the pandemic, channelling an increased share of bank resources through fast-disbursing budget support operations through a gradual approach.
In April 2020, the bank pooled its funding and created the “COVID-19 Response Facility” (CRF) with a funding of $10 billion for 2020, to assist our member countries, governments and private sector, in fighting the pandemic.
In addition to country specific operations, the bank is also financing specialised international and regional organisations fighting the pandemic in Africa, such as the World Health Organization and the African Center for Disease Control.
This COVID-19 emergency aid will help build capacity for prevention, testing and treatment prevention in 41 African countries.
It will also upgrade surveillance systems, help guarantee the supply and distribution of laboratory tests and reagents and support national and regional coordination mechanisms.
As part of its resource mobilisation, the bank launched a record $3 billion “Combat the COVID-19” social bond to help fight the pandemic. It is the world's largest US dollar-denominated social bond ever on the international capital market.
AO: Has Egypt submitted a demand to benefit from this financing, and what is its value and specific objectives?
MB: The bank is in close dialogue with the Government of Egypt on financing arrangements that will contribute to counter the negative impacts of the COVID-19 pandemic.
The bank remains a committed partner in the fight against the pandemic as well as for the post-COVID recovery, focusing on core projects that will meet immediate needs as well as strengthen Egypt’s competitiveness in the global market.
Whilst working on these short and medium term arrangements, on the immediate term, the bank has recently provided a $500,000 emergency assistance grant to Egypt – approved on 25 May 2020 - to offer food relief to at least 37,000 households and contribute to restoring the livelihoods of vulnerable populations severely affected by COVID-19.
The intervention will seek to complement ongoing activities by Egypt’s government to mitigate the effects of the virus pandemic on Egyptians.
AO: How do you see the measures Egypt has taken to cope with the crisis, including the provision of a EGP 100 billion financial package, and support for irregular employment?
MB: Overall, the economic reform programme undertaken over the past few years has helped create greater Egyptian resilience and buffer to shocks like the pandemic, and also strong credibility vis-à-vis financing institutions.
Since the COVID-19 pandemic started, the credit ratings of ten African countries (and several outside the continent) have been downgraded, whilst Egypt has maintained its credit rating.
The EGP 100 billion package, representing around 2 percent of GDP, is an important step to fight the impact of pandemic on the economy.
At the same time, the government has taken numerous others measures on different aspects of the economy. This broad-based and comprehensive response has been critical in limiting the effect of the pandemic.
Many actions aim to protect the liquidity of enterprises, such as delayed payments on loans without fines; delayed payments on taxes; loans for specific sectors such as aviation and tourism; and concessional loans for companies operating in specific sectors.
How do you see the measures taken by the Central Bank of Egypt to confront the crisis and support the sectors of industry and tourism and reduce the interest rate?
MB: The Central Bank of Egypt slashed policy rates by 300 bps on 16 March. The drop on policy rates should imply a decrease of interest rate for enterprises, which is an essential factor for keeping industry going.
Access to financing has been an impediment to business development; especially, small and medium enterprises (SMEs) have had limited access to credit.
Hence measures to facilitate the access to credit should be favoured like easing procedures, and building financial management capacity of SMEs.
The tourism industry is important for Egypt as it generates foreign currency, it provides employment and contributes to GDP. Last year the sector contributed to 25 percent of exports.
The current national efforts aim at preserving tourism businesses by providing measures to protect their liquidity as well as planning upgrades during the time of the pandemic.
AO: How do you see the impact of the crisis on the private sector and small and medium enterprises?
MB: Small and medium enterprises in the service sector have been significantly impacted by the restrictions in place to limit contagion, especially in the sector of tourism, restaurants, cafés, hotels and retail, which are important contributors to employment in Egypt.
The service sector totals just over half of GDP in 2019 (53 percent). And the sector contributed the most to GDP growth in 2019 at 4.2 percent.
The measures undertaken helping the liquidity of businesses aim to limit the number of profitable enterprises going into bankruptcies and laying off workers.
The measures put in place by the government and the CBE should allow small companies – which make up the majority of the private sector - to resume operating as soon as the pandemic will be over, allowing then for a strong recovery.
It is so important for social and economic reasons to keep companies afloat and maintain their workforce, to be ready for a strong come-back during the recovery phase, as this is, to a large extent, easier than letting businesses fail and then supporting them to start up again.
The bank is collaborating with other development partners in a study led by the Government of Egypt on the impact of COVID-19 on SMEs.
Once completed, the study will enable the government, with partner support, to implement measures that ease doing business for SMEs, improve the enabling environment, and provide financial and non-financial support to SMEs in Egypt. The study is expected to be completed by the end of the summer 2020.
AO: Has the African Development Bank issued any studies on the coronavirus and its economic effects?
MB: Before the COVID-19 pandemic, the AfDB projected for growth to keep increasing reaching 5.8 percent in 2020 and 6 percent in 2021 and macroeconomic imbalances to be almost fully corrected.
The pandemic implies lower growth prospect, yet, as with major crises, it also sheds light on new potential and opportunities. Maintaining and entrenching macroeconomic stability remains important for Egypt, and to keep positioning the country for a recovery that will be as quick as possible, which means maintaining a focus on the country’s competitiveness.
As the African bank, in a context where many world economies are becoming more inward looking, we see the great potential for strengthened African integration over the medium term in this regard.
Despite huge trade and investment opportunities in the region, the level of intra-regional trade in North Africa is one of the lowest in the world (below 5 percent) and represents an opportunity in itself.
At the same time, Egypt could strategically benefit from a larger opening to sub-Saharan Africa which has favourable economic prospects, especially following the implementation of the African Continental Free Trade Area (AfCFTA).
To take full advantages of potential trade, non-tariff barriers need to be looked at to facilitate private sector development, job creation and overall inclusive growth. One area with good development prospects given its importance in Egypt is agriculture, which accounted for 11.5 percent of GDP in 2019.
However, its contribution to growth was only 0.4 percent in 2019 (compared to 4.2 percent for the service sector). Consequently, current efforts aiming for the over the development of agribusiness and seizing opportunities with other African countries can increase productivity, create jobs and help anchored inclusiveness.
AO: Has the pandemic affected the programmes implemented by the AfDB in Egypt?
MB: The bank’s current public sector programme consists of 13 operations under implementation, of which three are infrastructure investments and the others are technical and capacity building grants.
Apart from some slowdowns, which were expected, the infrastructure projects have maintained momentum and have not been significantly impacted by the pandemic. Civil and other infrastructure-related works are continuing, thanks to the government’s efforts in tackling the pandemic, including avoiding a hard lockdown.
On the other hand, some grant operations have experienced some disruptions, for example in terms of interruptions to training courses and public consultations required for certain studies.
Because of the need to comply with social distancing, the executing agencies managing these grants were compelled to postpone these activities.
However, we have maintained regular contacts with our clients through virtual meetings and exchanges, and continue to process new projects and programmes for financing, to meet the immediate needs of the government and private sector clients in light of COVID-19, as well as continuing infrastructure projects that are deemed priorities for the country’s development, and will contribute to the economic recovery.
AO: When will the AfDB start returning to work normally and how can we balance between health measures and return to work?
MB: All bank staff are currently working from home at the headquarters and in all the countries where we have offices. My experience in Egypt is that this has worked better than anticipated, with a good internet connection and a greater use of our online systems and tools.
In terms of virtual working, we are now so much more advanced than when the pandemic started. So when we talk of returning to working as normal, the question is what kind of arrangements we will return to.
We expect to continue building on the lessons we learned regarding new ways of working and expect to have a “new normal” working setup when we return to the office.
For sure, we will rely more on virtual meetings and we will review our policies on working from home, based on the good results we have experienced. However, it’s also clear that virtual working is not always optimal, for example, brainstorming sessions for collaborative, creating thinking still seems to work best by meeting in person.
The timing for the return to office work depends on several factors. Our foremost consideration is the safety of our staff, as well as clients and partners. We expect a gradual return to office when we deem the conditions to be ready and we will continue to enforce the bank’s health protocols and precautionary measures to safeguard our staff, whilst being guided by the Egyptian authorities.
AO: Will the bank’s annual meetings be held online and what are their main themes and preparations?
MB: The Bank’s annual meetings are currently scheduled to take place in August in Abidjan, Cote d’Ivoire. We are closely monitoring the COVID-19 situation and should the pandemic persist making it not feasible to hold the meetings as planned, the necessary changes will be made in due course.