Egypt will need to complete projects and start repaying loans if it wants more funds from the Islamic Development Bank.
The Arab world’s most populous nation got $1.3 billion from IDB, pushing the Jeddah, Saudi Arabia-based multilateral lender beyond a self-imposed limit on how much it can lend. IDB and its units have extended $12.2 billion for projects in Egypt, including the development of an airport and an oil refinery.
“Unless we’re able to expedite completion of the projects, we won’t be able to approve additional ones this year,” Walid Abdelwahab, the IDB’s director of infrastructure, said in an interview at the bank’s head office in Jeddah on April 23. “This is our number one challenge to make sure the projects are implemented on time, not only because it creates headroom for exposure limit, but also it creates results on the ground.”
Egypt’s economy is struggling to recover from the worst slowdown in two decades after two presidents were toppled in the past four years. The country signed a total of $60 billion in deals during an investment conference in the Red Sea resort town of Sharm El-Sheikh last month, including $36.2 billion in direct investments, Prime Minister Ibrahim Mahlab said in March.
IDB, which was set up in 1975 to help boost the economies of its 56 member states, is helping to fund the development of the first and second phases of Sharm El-Sheikh’s international airport and an oil refinery in the southern Egyptian city of Assiut. IDB’s commitment to Egypt last year was the most on record, according to Abdelwahab.
“This is an economy that needs to secure a lot of financing for a lot of projects, given what happened in the last four years,” Mohamed Abu Basha, a Cairo-based economist at investment bank EFG-Hermes Holding SAE, said by phone on Sunday.
Saudi Arabia, Kuwait and the United Arab Emirates extended billions of dollars in aid to help President Abdel-Fattah El-Sisi stabilize the country, which has faced political turmoil since the 2011 uprising that toppled Hosni Mubarak. El-Sisi won the presidential election last year after leading the ouster of Islamist President Mohamed Mursi in July 2013.
While IDB is limited by its own exposure cap to provide more cash, Egypt has access to other sources of funding.
“It’s not just IDB, Egypt is knocking on a lot of doors,” Abu Basha said. “And it’s not only up to the government to get cash, it’s also the private sector.”
The Islamic lender plans to open an office in Cairo this year to monitor the progress of projects and to boost its presence in the North African nation, President Ahmad Mohamed Ali said in an interview on April 23. It will also help lower administration costs, he said.
For now the only way for IDB to resume financing in Egypt is to wait for projects to mature, Abdelwahab said.
“If we don’t do anything else, this is the only way to approach it. Obviously these projects take time,” he said. “It means we have to find a way to create headroom, we cannot simply sit and do nothing. The needs are much bigger than the capacity of all the banks combined.”
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Source: Bloomberg Business