Development aid to Egypt provides much-needed support to suffering economy

By Hisham Allam

Development aid to Egypt provides much-needed support to suffering economy

Foreign development aid to Egypt has increased dramatically in recent years against the background of the daunting challenges the country has faced such as COVID-19, the war in Ukraine, declining tourism and the fluctuating Egyptian currency. Thus, in 2022, development aid to Egypt amounted to $13.7 billion, compared to $10.3 billion in 2021 and $9.9 billion in 2020.

According to the Ministry of International Cooperation’s 2022 Annual Report, Egypt has concluded soft development financing agreements worth $13.7 billion in all development fields and sectors, including $11.1 billion for food security, agriculture, sustainable infrastructure, renewable energy, the environment, housing, and education. An additional $2.6 billion in soft development funds has been allocated to the private sector.

In 2022, Egypt signed development financing agreements in priority sectors that promoted the green transition, with a value of $184 million in the housing, utilities, and local development sectors, $1.8 billion in the budget support sector, $2.5 billion in the transportation sector, $31 million in the energy and renewable resources sectors, $137 million in agriculture, and $38 million in the environment sector, the Ministry of International Cooperation told DevelopmentAid.

Source: Ministry of International Cooperation’s 2022 Annual Report

The funds obtained by Egypt’s private sector over the last three years reached approximately $7.3 billion. Cooperation between the private sector and development partners is not limited to development funds; investment guarantees and credit lines are also provided to banks for these to be redirected to small projects the report mentioned.

Among the most apparent examples of this collaboration is the $80 million partnership signed at the Climate Conference COP 27 in Sharm El-Sheikh between the Norwegian company, Scatec, and the Egyptian company, FertGlobe, to launch the first project to invest in green hydrogen in the Suez Canal Economic Zone funded by the European Bank for Reconstruction and Development.

Egypt launched the electronic system for data management and follow-up of concessional development financing projects (AIMS) to reinforce and strengthen the follow-up procedure and evaluation of development cooperation projects in order to drive sustainable development efforts and government performance efficiency through evidence-based management that is supported by effective monitoring and evaluation mechanisms, according to the Ministry of International Cooperation which coordinates and oversees all national agencies that receive foreign funding.

In a conversation with DevelopmentAid, Dr. Hisham Ibrahim, Professor of Finance and Investment at Cairo University, explained the increase in funding grants was due to the recent efforts of the Egyptian government, represented by the Ministry of International Cooperation, to present new projects that are compatible with donors’ agendas and then obtain the funding required to implement these projects.

In addition to this, according to Ibrahim, there is a low standard of living for most Egyptians, and the weakness of facilities and infrastructure became an incentive to pump a great deal of investment and financing into these areas.

The increase in Egypt’s foreign development aid demonstrates the international community’s commitment to assisting the country’s development. The funds are being used to address a variety of issues and to lessen the impact of successive economic downturns. The aid also helps to strengthen Egypt’s private sector which is crucial for long-term economic growth.

As previously reported by DevelopmentAid, the Egyptian pound has lost about half of its value against the US dollar since March 2022. This has led to a shortage of dollars in the country which in turn has reduced imports and caused the price of goods to rise. The devaluation has also accelerated annual inflation rates which reached about 36.8% in June up from 26% in January 2023, the highest level in five years. According to the World Bank, one-third of Egypt’s 104 million people are poor with another third at risk of falling into poverty.