World Bank, EU to funnel USD 8-9 bn into Egypt: The World Bank is expected to extend around USD 3 bn in financing to Egypt, Finance Minister Mohamed Maait said yesterday at a presser attended by Enterprise. The country will also receive some USD 5-6 bn in financing from the European Union, Maait separately told Asharq Business.

ICYMI- The announcements give further nuance to Maait’s statement last week that our agreement with the International Monetary Fund could help secure a total of USD 20 bn in foreign support. This figure includes around USD 11 bn from international partners — including the World Bank, European Union, Japan, and the UK — alongside the USD 8 bn IMF package we agreed on with the Fund last week and a still-in-talks USD 1-1.2 bn in climate finance under the Fund’s Resilience and Sustainability Facility.

More backers named: The African Development Bank, the Arab Monetary Fund, and “the European Bank” — which we assume is either the European Bank of Reconstruction and Development or the European Investment Bank — are also set to extend financial support, Maait said.

The latest on our IMF package: Our expanded USD 8 bn IMF package comes under a three-year program, Maait said. The first tranche will be disbursed after the IMF executive board signs off on the program, he added — the board will meet to consider the pact before the end of March.

Maait did not specify how much of the European Union funding is new or break it down into components or specific projects. He told Asharq Business that part of the EU funding will flow through the private sector and part will be in funding for the state budget.

The fine print: Between private-sector investments and government-to-government programs, the European Union already has a deep pipeline of activities here. We don’t expect the EU to provide us with significant direct budget support. Instead, it will push ahead with a deep investment program, including projects already announced.

BACKGROUND- Egypt has attracted significant investment from European development finance institutions as well as other investors and corporates. The EBRD, European Investment Bank, Proparco, DEG, and BIO have kept private equity and venture capital firms in business for years now, and a number of them are not shy about taking direct positions here.

OTHER KEY TAKEAWAYS FROM MAAIT’S SPEECH-

#1- Gov’t fiscal targets for the next fiscal year have gotten more ambitious: The government is now targeting a primary surplus of no less than 3.5% for the fiscal year 2024-2025, 1 percentage point higher than the figure it had penciled in back in January. It also sees the debt-to-GDP ratio narrowing to below 90%, a 1.9 percentage-point downward revision from the January forecast.

#2- At least half of the Ras El Hekma proceeds are going to FinMin: No less than 50% of the proceeds from the USD 35 bn Ras El Hekma transaction will enter the state’s general treasury as EGP revenues, enabling the Finance Ministry to finance its expenditures and helping it minimize public debt. The USD will remain with the central bank to bolster FX reserves.

#3- Giving foreign debt markets a break: The FinMin doesn’t intend to tap foreign debt markets or issue any international bonds before the end of the current fiscal year in June, Maait said. Pundits have suggested that the combination of the float, Ras El Hekma, and the IMF program have made it possible for Egypt to once again access the eurobond market.

#4- Some subsidies are set to stay put:The government’s allocation to fuel subsidies will remain unchanged until the end of the fiscal year even if fuel prices change. The state also continues to offer bread at a fixed price despite production costs that have risen up to EGP 1.1-1.2 per loaf, Maait said.

#5- Others could go out the window: The Finance Ministry is in talks with the Federation of Egyptian Chambers of Commerce to scrap the 11% subsidized loans for industry and agriculture introduced last year in light of the interest rate hikes introduced last week, Maait told Asharq Business, adding that the government will continue to support the two sectors in other ways.

#6- Customs to dip? The government will not raise customs and is instead “considering reducing them in the coming period as it aims to achieve stability to alleviate the burdens on domestic production,” Maait said. Customs are calculated and paid in EGP based on the cost of the import — all of which got more expensive at the end of last week when we floated.

#7- A cap on public investment: The Finance Ministry will allocate no more than EGP 280 bn to public investment in next fiscal year’s budget. The cap on public investments for all state entities, meanwhile, has been set at EGP 1 tn to help create “space for the private sector and increasing its investments in the economy,” Maait said. The IMF, in announcing its assistance package, placed big emphasis on the Sisi administration’s pledge to slow down infrastructure spending.

Exceptions apply: The budgets allocated to all state entities for the next fiscal year will remain the same as this year’s, with the health, education, and industrial sectors being the exception, Maait said.

Maait’s presser caught the attention of the int’l press: Reuters | Bloomberg.

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