The World Bank has approved a $3 billion loan to Egypt, to be disbursed over the next three years, International Cooperation Minister Sahar Nasr said in a statement on Thursday.
Nasr said that the loan deal, which will be signed on Saturday, has a maturity of 35 years and carries an annual interest rate of 1.68 percent.
The minister said the loan would help the government secure economic growth and provide much-needed foreign currency liquidity.
Egypt, which is currently experiencing a foreign liquidity crunch, requires foreign currency for imports of basic foodstuffs and raw materials for industries. Reserves stood at $16.44 billion at the end of November.
The first tranche of the loan, amounting to $1 billion, will be delivered to Egypt before the year’s end.
The loan is part of the bank’s Development Policy Financing which “supports fiscal consolidation through higher revenenue collection, greater moderation of the wage growth, stronger debt management…reducing energy subsidies and liberalising the energy market,” according to a press release by the bank on Thursday.
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.
Electricity subsidies were also reduced twice and new taxes introduced, including a property tax.
A long delayed value-added tax is expected to be introduced before the end of this year.
The government has also approved a law liberalising the gas market in October.
In addition to the $3 billion development policy financing, the World Bank group will increase its financing in Egypt to $8 billion from 2015 to 2019.
The bank has 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 fro 2015 to 2019, the bank said in a press release on 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.
Egypt’s economy has suffered from political turmoil since the 2011 revolution toppled autocrat Hosni Mubarak.
Billions of dollars in financial support from Gulf Arab allies have helped keep the economy afloat.
source:Reuters
