The World Bank board of directors has approved a US$1 billion budgetary support loan for Egypt, the bank announced Thursday evening.
The loan is the first installment of a $3 billion package anticipated to be released over the coming three years. The second and third tranches will be subject to “satisfactory implementation of the multi-year reform program,” according to the World Bank statement.
The loan comes as part of a new Country Partnership Framework that was also approved Thursday, which will guide the bank’s relationship with Egypt from 2015-2019. During this period, the World Bank Group’s financing arms plan to supply Egypt with a total of $8 billion in support. This figure includes funding for specific projects, and is not limited to direct budgetary support.
“World Bank Group support to Egypt will focus on the country’s urgent need to create more jobs, especially for the youth, improve quality and inclusiveness in service delivery, and promote more effective protection of the poor and the vulnerable,” said Asad Alam, World Bank country director for Egypt, Yemen and Djibouti, in a press statement.
The new agreement “reflects a clear departure from past World Bank support for Egypt,” the organization claimed. In addition to offering increased funding, the bank says it will also “focus on supporting the country’s efforts to renew its social contract with its citizens” under the new framework.
Improving governance, supporting private sector job creation and improving social inclusion are three pillars of the new agreement, the bank said.
“Jumpstarting the economy can’t happen without enabling the private sector to play a catalytic role in diversifying the economy, increasing competitiveness and creating jobs,” said Mouayed Makhlouf, regional director for the Middle East and North Africa at the World Bank’s International Finance Corporation. “IFC will continue to support the private sector and reforms that create a level playing field and a business-friendly environment to support Egypt’s growth.”
The loan from the World Bank, along with recently secured support from the African Development Bank and Saudi Arabia, will bring badly needed foreign currency into Egypt and help the country cover a fiscal deficit that is expected to exceed LE250 billion.
Egypt’s government also views the loan as a stamp of approval that gives credibility to the country’s economic plans.
However, activists have criticized the loan process for lacking transparency. Although the bank undertook a public consultation program in advance of the loan and the new Country Partnership Framework, the public was given little opportunity to review the proposed documents.