The China-backed Asian Infrastructure Investment Bank’s (AIIB) board of directors approved a $510 million in funding for two infrastructure projects in Egypt on Sunday.
Co-financed by the Egyptian government and other lenders, the two projects are expected to help the country transition to a greener, cleaner economy.
Egypt is currently the only AIIB member outside Asia to receive funding from the Asian bank.
With its strategic location between Europe, Africa, and Asia and its abundant wind and solar resources, with the right investments in cross-border transmission connections, Egypt has the potential to become a regional green energy hub, the bank said in a statement.
To support its potential, AIIB is investing in the Benban Solar Park to help meet domestic energy demands, stabilise the grid, and scale back use of expensive and polluting hydrocarbons.
“We see a lot of opportunity in Egypt’s renewable energy sector and will support the government’s goals of exporting clean energy to its neighbors.” said AIIB President Jin Liqun.
“This is aligned with our priorities to invest in sustainable infrastructure and enable cross-border connectivity.”
AIIB’s board recently visited Egypt and met with government officials who highlighted their efforts to revitalise the country’s aging energy infrastructure and transform its power generation and transmission capacity.
According to the Global Infrastructure Hub, there is a $230-billion infrastructure investment gap across all sectors in Egypt. Like much of Asia, the gap in Egypt cannot be filled through public sector money alone, the bank statement added.
Private sector investment is required to build critical infrastructure needed to support Egypt’s growth. Under its Strategy on Mobilising Private Capital for Infrastructure, AIIB is examining opportunities to address Egypt’s infrastructure financing gap.
Egyptian Minister of Finance Mohamed Maait said the government is working on enhancing macroeconomic stability to accelerate a higher private investment path, modernising PPP legal and operational framework. It also works on facilitating additional funding from international institutions at preferential rates, including from AIIB, Maait added.
Strengthening implementation capacity for public-private partnership projects has been identified as a way to attract private sector investors to Egypt. Lack of capital for smaller projects is also a challenge for the local market.
“The need to mobilise private capital is not unique to Egypt, but we must come up with an approach that is responsive to local market conditions,” said President Jin. “With our peer multilateral development banks and the Government of Egypt, we are actively looking at ways to address private sector investment barriers.”
To date, AIIB has approved two projects in Egypt. The first constitutes a $300 million loan for a co-financed project with the World Bank, designated to improve rural sanitation services for 892,000 people in 178,000 households in Egypt.
The Asian bank has also approved up to $210 million in financing for the Benban Solar Park to tap the country’s renewable energy potential. The project will increase solar power generation capacity, reduce dependence on hydrocarbons, and help Egypt meet its commitments under the Paris Agreement. The project is co-financed with the International Financial Corporation and other lenders.
