Egypt: AfDB Board approves 2015/16-2019/20 Country Strategy Paper and US $500-million loan for Economic Governance and Energy Support Program

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The Board of Directors of the African Development Bank Group (AfDB) approved on Tuesday, December 15, 2015 in Abidjan the Country Strategy Paper (CSP) of the Arab Republic of Egypt for 2015/16-2019/20. The Board also approved a US $500 million loan entitled the Economic Governance and Energy Support Program (EGESP).

The country strategy was designed to support Egypt in its move towards accelerated inclusive growth and presents the plan for the AfDB’s strategic activities over the next four to five years in Egypt.

Specifically, the framework aims at improving the well-being of Egyptians through enhanced public service delivery, macroeconomic recovery, the creation of sources of income and better targeted social safety nets. It will also contribute to create jobs for a fast-growing and young population with 50% women, both in rural and urban areas, in an inclusive growth environment supporting vocational training and skills development.

The CSP is expected to foster private-sector competitiveness through improved reliability and diversification of energy services to improve agricultural productivity, value added agri-business, and promote enhanced water management.

“This Strategy will serve the Bank’s objective of green growth by improving the environment footprint of the energy sector and better use of Egypt’s scarce water and land resources,” Leila Mokaddem, the AfDB Resident Representative in Egypt, said. “The CSP will also support inclusive growth by fostering equal opportunities, transparency and accountability as well as social protection of the most vulnerable.”

The CSP is articulated around two pillars (i) development of infrastructure that will foster sustainable and inclusive growth; and (ii) strengthening governance by enhancing transparency, efficiency and fairness.

The first pillar will serve the Bank’s Ten Year Strategy objective of inclusive growth by seeking to reduce economic and social disparities across regions in terms of access to basic infrastructure services and enhance access of low-income individuals to economic opportunities. Thus, the Bank will seek to support the provision of an enabling infrastructure in key interlinked sectors to promote private-sector growth and competitiveness, and social and spatial inclusion. The Bank will focus its support on energy, agriculture and water resource management by covering wastewater treatment and sanitation and agriculture sub-sectors. Due attention will also be given to skills development in these critical sectors to improve the country’s competitiveness and create jobs for both men and women.

Under the second pillar, the Bank aims at supporting Egypt’s comprehensive macroeconomic program through subsidy reforms, fiscal consolidation, improved efficiency, transparency and accountability of public institutions and public enterprises. This pillar would also enable the Bank to develop a business environment that is conducive to private sector development, including micro, small and medium enterprises (MSMEs) to create jobs particularly for the youth and improve inclusiveness by supporting social protection, enhanced efficiency in delivery of public services to disadvantaged groups, and strengthened human capital through entrepreneurship and vocational training and skills development.

EGESP was approved for a total loan amount of US $500 million. The program will target the three most critical areas of reform, which have been in the past difficult to deal with, but which the Government is now addressing in a bold and vigorous way. These include (i) increasing Government revenues through higher revenue collection, reprioritization and rationalization of expenditure and implementing public finance management reforms and internal audit mechanism; (ii) ensuring sustainable energy supply through improved governance, efficiency and private-sector engagement in the energy sector; and (iii) improving the business environment through investment laws and financial inclusion, industrial license requirements as well as enhancing competition.

The Bank’s support through this operation will contribute to sustaining these reforms and help to create the needed fiscal space to facilitate a smooth implementation of the government’s budget, the deepening of the implementation of fiscal consolidation, and to improve the targeting of public action to the most vulnerable segments of the population. EGESP is aligned with the new CSP and will contribute towards the attainment of Egypt’s inclusive and resilient economic growth.

This operation brings the AfDB’s active portfolio in Egypt to US $2.23 billion (32 operations) with a disbursement rate of 47%. Total AfDB approvals for Egypt in 2015 amount to US $692 million, consisting of three loans totaling US $685 million, and five grants totaling US $7 million.

Since 1974, the Bank Group had financed some 100 operations valued at approximately US $6.3 billion. Bank-funded projects have been primarily in the areas of infrastructure, energy and the social sector (mainly loans to small and medium-sized enterprises).