World Bank Aid Pushes Global Egypt Bailout Over $50 Billion

(Bloomberg) -- The World Bank is set to provide Egypt with over $6 billion, boosting the global bailout for the North African nation’s struggling economy to more than $50 billion in the past few weeks.

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The Washington-based institution said Monday the financing covers the coming three years, with half aimed at government support and the remainder to buoy a private sector seen as key to medium and long-term sustainable economic growth.

The announcement came a day after the European Union pledged about $8 billion in aid, loans and grants. Those funds followed a newly-expanded $8 billion International Monetary Fund program that was unveiled hours after authorities enacted the nation’s biggest rate hike ever and devalued the currency for the fourth time since early 2022.

The World Bank’s board is scheduled to meet in May to discuss the first batch of funding of around $1 billion, International Cooperation Minister Rania Al-Mashat told Bloomberg. This payment is expected to be delivered at the start of the next fiscal year in the form of support for the state budget, said Al-Mashat, who’s also governor of Egypt at the World Bank.

The World Bank “supports the measures the country is taking for its economic recovery and restoring a sustainable path for inclusive growth,” it said in a statement.

Read More: Egypt Unlocks $8 Billion IMF Loan to Ease Crisis With FX Float

The latest financing was expected and reflects a renewed confidence in Egyptian authorities’ commitment to push ahead with reforms. Those measures became urgent as the nation of over 105 million grappled with its worst foreign-currency crisis in decades and record-high inflation.

What Bloomberg Economics Says...

Funding from the World Bank takes total financial pledges to Egypt to $57 billion. That’s enough to address the country’s dollar shortages for a few years. But addressing the chronic trade deficit, the flexibility of the exchange rate, and the dominant role of the army in the economy would require more than throwing money at these problems.

— Ziad Daoud, chief emerging-markets economist. Click here to read more.

The catalyst for this month’s long-awaited devaluation was a $35 billion deal with the United Arab Emirates, most of which was earmarked to develop prime land on the Mediterranean. That funding threw open the door for what was a more than 38% plunge in the value of Egypt’s pound versus the dollar and a rate hike of 600 basis points.

After the moves, Moody’s Ratings raised Egypt’s credit outlook to positive.

The World Bank said its program would focus on increasing opportunities for the private sector, “strengthening the governance of state-owned enterprises, and improving the efficiency and effectiveness of public resource management.”

Read: The UAE’s $35 Billion Investment in Egypt Is a Geopolitical Flex

The funding pledges, as well as the UAE’s investment, underscore the view of Egypt as a Middle East stalwart that’s too big to fail. Israel’s war with Hamas and a conflict raging in neighboring Sudan further spotlight its regional weight.

President Abdel-Fattah El-Sisi’s government is playing a key role alongside the US and Qatar in trying to halt the crisis in bordering Gaza and chart a two-state solution.

(Update with comment from minister in fourth paragraph.)

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