African Development Bank (AfDB) approved in November a loan worth $131 million to promote private sector development and economic diversification in Egypt under the bank’s Private Sector Development and Economic Diversification Support Program – Phase I (PSD-EDSP I).
This program supports the Egyptian government’s efforts through a robust public reform matrix to facilitate increased private sector development by improving the business environment and diversifying sources of green growth.
The bank said on its official website that Egypt has made substantial efforts to mitigate the impacts of the COVID-19 pandemic and Russia’s invasion of Ukraine on the domestic economy and preserve resilience.
“After addressing these shocks through emergency measures that benefited vulnerable communities, the government firmly committed to implementing appropriate mid- to long-term measures to build a resilient economy through private sector development, economic diversification, and green transition,” according to the AfDB.
The objectives of the newly approved finance include improving the business environment by adding new incentives for private sector investors and reducing delays in obtaining investment licenses, strengthening the framework for competition and commercial justice, promoting key productive sectors, including manufacturing and agribusiness, and supporting green transition by allocating the necessary land to renewable energy investments and promoting green hydrogen.
The projected outcomes from this program are mainly boosting private investment from 3.3% of GDP in 2021/22 to 4.3% in 2024/25, reducing the processing time for business licenses from 28 days in 2022 to 10 days in 2025, raising manufacturing value from 14.2% of GDP in 2021 to 17% in 2025, as well as increasing the area of state-owned lands dedicated to renewable energy investments up to 30,000 square kilometers by 2025.
Direct beneficiaries of this finance include the Egyptian State, private industries, and agri-business operators, while the indirect ones involve Local small and medium-sized enterprises (SMEs), chiefly women-owned businesses.
AfDB is one of the international financial institutions (IFIs) that Egypt committed to securing finances to bridge the financing gap it is experiencing of $17 billion over four years, according to estimations from the International Monetary Fund (IMF).
This comes under the ongoing $3 billion Extended Fund Facility (EFF) program the IMF approved for the country in December 2022. Since then, Egypt has failed to fulfill its commitments under the loan program, a matter that has resulted in the incompletion of any of the program’s reviews as of yet.
Also in November, the AfDB lent the Commercial International Bank (CIB) in Egypt $148 million to support the country’s SMEs and trade sectors. The loan includes a $10 million Line of credit with a tenor of 10 years, a $90 million subordinated loan with a tenor of 10 years, $32 million trade finance line of credit with a tenor of 3.5 years, and $16 million trade finance line of credit from the Africa Growing Together Fund (AGTF) with a tenor of 3.5 years.
This funding is expected to contribute to mobilizing significant resources for key economic sectors in Egypt, enhancing productive capacity and stimulating growth. This will increase economic output, improve the country’s competitiveness, generate fiscal and export revenues, and create much-needed employment opportunities, particularly for women.