Egyptian ministry of international cooperation announced on Friday, September 9, that Egypt had received $1 billion from the World Bank, which represents the first tranche of a $3 billion loan that is to be distributed over the next 3 years. The transfer was made possible by the adoption of VAT tax, which was both a prerequisite for World Bank aid and a significant part of a reform programme that the International Monetary Fund (IMF) pushed from. International Cooperation Minister Sahar Nasr stated that the funds will be used to ‘create job opportunities and improve citizens’ living standards’.

The World Bank loan forms a part of Egyptian government strategy to seek aid from international institution in order to fund a costly 3-year economic programme and improve the current account deficit, which exerts a downward pressure on the value of the Egyptian pound. An IMF deal negotiated in July and August, worth $12 billion, is the centrepiece of this strategy, but it’s implementation is conditional on Egypt adopting a series of market reforms and obtaining $5-6 billion in external financing.

The transfer of the first tranche of the World Bank loan is a signal that the required reforms are being implemented rather quickly despite domestic opposition. Apart from the IMF and World Bank deals, Egypt had negotiated a loan from the African Development Bank (ADB) worth $1,5 USD billion and the first tranche of $500 million was distributed in January. Taken together, the World Bank and ADB deals fulfil most of IMF’s external financing requirement.

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