Egypt will extend EGP 120 bn in financing to shore up food security

Egypt’s Finance Ministry intends to allocate EGP 120 bn to support agricultural and industrial production in a bid to shore up food security, according to a statement. The initiative — an iteration of a previous EGP 150 bn incentive package for agriculture players — will target new and renewable energy projects, freezone factories, and agricultural cooperative associations in efforts to reduce agricultural production costs, boost exports, and enable the country to meet its demand locally.

The details: The financing will be offered at an interest rate of 15%, with EGP 105 bn allocated to finance working capital, while the other EGP 15 bn will be used to fund machinery, equipment, or production lines. Under the initiative, companies will have a higher maximum withdrawal limit of EGP 100 mn for individual entities, and EGP 130 mn for associated ones, up from the previous EGP 75 mn and EGP 112.5 mn cap, respectively. Projects that secured loans under the previous program (which has a lower interest rate of 11%) will continue to be subsidized, the statement noted.

How will it work? Local banks will disburse the loans to those eligible and in return receive the difference between the 15% rate and the corridor rate from the Finance Ministry. The state’s public treasury will cover around EGP 8 bn annually in interest rate differences for beneficiaries of this initiative.

Climate change is a major hindrance for Egypt’s food supply:Climate change poses a rising threat to Egypt's food security, according to research (pdf) by Cairo University and the National Research Center which concluded that the deterioration of weather conditions will reduce food production by up to 3.8% by 2050, leading to increased hunger risks and a decline in per capita food consumption.

Impacted harvests: Climate change is expected to significantly reduce wheat yields in Egypt as a result of its impact on growing seasons, cultivation areas, and soil salinity, according to Carnegie Endowment for International Peace. This is predicted to make the country more vulnerable to international and domestic food shocks.