- Egypt has secured $250 million to aid its battered economy after the elections held in 2023.
- The country has been struggling, with the economy remaining on life support, while the regime continues to plough on with mega projects.
- Africa Finance Corporation and ITFC have a successful joint track record in Islamic finance, previously providing a $50 million loan to Egypt and a EUR 25 million loan to Senegal in November 2022.
Egypt has secured a $250 million loan from the Africa Finance Corporation (AFC) to better prepare for anticipated shocks, disruptions, or stress that the North African country may experience.
As the continent’s primary provider of infrastructure financing solutions, AFC will extend a $250 million Sharia-law-compliant trade loan to Egypt in collaboration with the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group.
According to a statement from IFC, the loan proceeds will contribute to addressing Egypt’s immediate priorities and enhance economic resilience by financing the purchase of critical petroleum products and agricultural commodities, which are essential pillars of Egypt’s economic infrastructure.
The one-year trade loan will be evenly split between two critical state-owned entities in Egypt: the Egyptian General Petroleum Corporation (EGPC), supporting the procurement of fuel and petroleum products, and the General Authority for Supply Commodities (GASC), aiding in improving food and economic security through essential agro-based commodity imports like wheat, corn, vegetable oils, and sugar.
This trade loan represents a dynamic response to powering evolving economic resilience in Africa. Samaila Zubairu, the President and CEO of AFC expressed delight in delivering this landmark transaction for Egypt and highlighted AFC’s commitment to collaborating with powerful partners like ITFC to drive financial innovation, transforming the African continent by fostering local manufacturing, domestic value-addition of primary commodities, and local job creation.
Zubairu looks forward to continued partnership as they support Egypt’s Vision 2030 national agenda.
Read also: Egypts El-Sisi secures third term amid dwindling economic prospects
What next after Egypt secures a $250 million loan
This development came when Egypt’s Ministry of Planning and Economic Development recently revealed that the country’s gross domestic product (GDP) recorded a 2.65 per cent growth rate at constant prices in the current fiscal year 2023-2024.
Consequently, Egypt’s economy experienced a slowdown from the 4.4 per cent growth rate recorded in the previous fiscal year 2022-2023.
The Northern African country has been grappling with economic challenges, with the economy requiring continuous support. While the government persists with large-scale projects, such as constructing a new capital, public debt continues to escalate.
Egypt faces an increasingly challenging task of raising funds for foreign debt repayments, given that external borrowing has quadrupled over the past eight years to finance initiatives like new capital, infrastructure development, arms procurement, and maintaining an overvalued currency.
Few of its grand projects are generating additional hard currency inflows. At the same time, foreign investors have added to its woes by snubbing Egypt and other emerging markets since the start of the Ukraine war, and global borrowing costs have climbed.
Across the country, price rises on subsidized goods have pushed the cost of living beyond the reach of many. The Egyptian pound’s steep fall against the dollar has led to increased competition for the hard currency needed for foreign goods and a subsequent shortfall in imports.
Powering Economic Resilience After Elections
“The Islamic Trade Finance Corporation is pleased to facilitate this financing for Egypt, reaffirming our commitment to supporting our member countries’ economic resilience, growth and stability.
“Our collaboration with AFC, an institution of such high repute, on this historic transaction, signifies the strength and power of multilateral financial institutions coming together to address Africa’s economic challenges,” said Hani Salem Sonbol, CEO of ITFC.
AFC and ITFC have a successful joint track record in Islamic finance, previously providing a $50 million credit to Egypt and a EUR 25 million loan to Senegal in November 2022.
By combining expertise and resources, this initiative is set to impact Egypt’s economic landscape, reinforcing its resilience and setting the stage for continued progress.
AFC recently supported the JPY 75 billion 5-year Samurai bond issued by the Government of Egypt as a re-guarantor.
Abdel Fattah el-Sisi returned as the president of Egypt in the election held at the end of 2023, securing a third term with 89.6 per cent of the votes in his favour. According to analysts and Egypt watchers, that el-Sisi would secure victory in the December poll was never really in doubt.
