INTERVIEW: Egypt diversifies international loans – minister

As Egypt took part in the IMF and the World Bank annual meetings held in Lima, Peru on 8-11 October, Ahram Online met the recently-appointed International Cooperation Minister Sahar Nasr for her first interview since taking office.

Sahar Nasr is the third woman to be appointed minister of international cooperation in the footsteps of Naglaa Al-Ahwany and Fayza Aboul-Naga. Nasr is a member of the presidential Advisory Economic Council. She worked as a leading financial economist in the Middle East and North Africa World Bank Finance and the Private Sector Development Department.

She was also a regional leader for the World Bank on issues of financial sector development, as well as a programme manager for MENA of the Micro, Small and Medium Sized Enterprise Technical Assistance Facility.

Ahram Online (AO): What is the importance of the IMF and World Bank meetings in Peru and Egypt’s participation in those meetings?

Sahar Nasr (SN): These meetings are held at a crucial phase for the global economy, especially for Egypt. The Egyptian government is currently sending an assuring message to the external world and formulating the accomplishments achieved recently, which are a lot.

We need in the coming period to specify Egypt’s economic priorities and our needs for developing quickly. This is a huge part of what we have succeeded in achieving in Peru.

We have held several meetings with international institutions such as the African Bank for Development, the Islamic Bank for Development, the European Bank for Reconstruction and Development and the World Bank to present to them the projects which Egypt seeks to finance in the coming period. We have invited these institutions as our partners to fund our developmental projects.

AO: Did you sign any deals on the sidelines of the meetings?

SN: Yes. The Ministry of International Cooperation has succeeded in signing very important deals with the Africa Growing Together Fund (AGTF), part of the AfDB Group, with the value of $50 million to continue financing the Sharm El-Sheikh Airport project (in the third phase) as soon as possible. This agreement is the first with the fund since 2011. The total cost of the project is $610 million, which is funded by the African Bank for Development with $90 million according to a deal signed late May, the current $50 million African Fund loan, and from an already signed deal with the Islamic Bank for Development which will provide $457 million in two phases. The rest of the cost is provided by the Egyptian Company for Airports. Egypt chose the African Fund offer after considering other offers.

AO: What is the importance of this project?

SN: The project aims to expand the Sharm El-Sheikh Airport’s capacity to improve aero transport within the country and benefit the tourism sector. A new terminal is under construction as part of the project of expanding the international airport in South Sinai. The total airport capacity is estimated to reach 18 million passengers annually. In the upcoming period, the government is targeting service projects to meet the needs of the population and the economy.

AO: Why has Egypt not taken any loans from the African Fund since 2011?

SN: The African Fund ceased to lend Egypt since 2011 because more than half of its portfolio was comprised of loans to Egypt, Tunisia and Morocco, which are three countries out of 54 African countries which is a huge percentage. And at a time when Egypt was going through political and economic turmoil, the reliance on the country would have threatened the fund’s rating and hence they chose to suspend all loans in the last period. But as Egypt’s economic performance improved and growth rates are back on track, the fund returned to its cooperation with the country through this agreement. Additionally, we have agreed with the fund on boosting our finances to $450 million by the end of the current year.

AO: What is Egypt’s balance at the African Fund for this year?

SN: $300 million, from which the ministry aims to benefit in funding projects with priority to the economy and the people.

AO: It is rumoured that as part of the Lima meetings, a fund for Arab countries will be created to help them in economic development.

SN: Yes, there are negotiations with Arab countries to establish a fund on the sidelines of the meetings in Peru. A lot of the countries in the region face several pressures such as political conflicts, a rising number of refugees which recently reached 5 million, in addition to other internal economic pressures. As such, the MENA countries decided to establish a fund from which all Arab countries can benefit. This is a result of an insufficient portfolio to these countries by the international institutions. Additionally, it is preferable to depend on our resources instead of only relying on external funds from international institutions. All the region’s countries supported the idea and we will start right away with formulating an organisational and financial structure for this fund. Egypt plans to play a pivotal role in this fund.

AO: How do you plan to manage this fund and how will you provide the necessary finances?

SN: The fund is being established by the United Nations, the World Bank, the International Finance Corporation and the Islamic Bank for Development. The board of directors for the fund will include representatives from all the region’s countries. As for providing the necessary funds, it will depend on contributions by member states.

AO: Is the ministry working on any other funding agreements at the moment?

SN: Yes. We have recently signed two deals with the World Bank. The first is for affordable projects at a value of $500 million, the second, signed just three days ago before attending the meetings, is for sanitation projects at a value of $550 million. We will begin implementation next month.

AO: Are you presenting any other projects?

SN: Yes. Currently, there are Egyptian missions working on presenting the million-and-a-half land reclamation project along with the ministries of agriculture and irrigation, in addition, we are presenting industrial zone projects along with the Ministry of Industry and Trade as well as sanitation projects and other service projects.

AO: Which institutions is the ministry negotiating with to fund these projects?

SN: The ministry speaks to all financial institutions with no exception. We plan to take up a new method in seeking funding. The ministry will decide on its priority projects, present them to all institutions, and choose the best offers in terms of prices but also expertise and project execution periods. There are institutions that outperform others in certain fields, but the most important thing is to seek funds from all institutions at the same time which could create a degree of competitiveness that would ultimately allow us to reach the best offers.

AO: You met with Arab banks and funds on the sidelines of the meeting. Did you agree on any cooperation in the next period?

SN: Indeed, I have met representatives from the Islamic Bank for Development, the Saudi Fund and the Kuwaiti Fund, but the meetings only included presentations of Egyptian economic performance at the moment, as well as the recent achievements. This was my first meeting with them since I took office, but I presented to them the Egyptian programme and they showed interest in financing the programme. But in the end we present our projects to these institutions and other international institutions to ultimately choose the best offer.

AO: What is the total amount of aid expected by the end of the current year?

SN: I cannot announce the final figure now but it will definitely depict a substantial increase by the end of the current year.

AO: As you took office, people expected deeper and special cooperation with the World Bank due to your former position at the bank.

SN: This is not true. The ministry targets all financial institutions equally, and the choice will always depend on Egypt’s interest and that of the people. The agreement signed with the African Development Bank is one proof.

AO: What does it mean for Egypt to be picked as an operational country in the European Bank for Reconstruction and Development?

SN: Other than an increase in the funds available to Egypt, the decision is also a testament of confidence in the Egyptian economy, its stability and the decreasing risks. This is an important accomplishment. The decision to include Egypt as a member in the bank will be finalised at the end of the current month.

AO: You have used the term “service projects” several times. What do you mean by it and which of these projects are targeted by the ministry for the coming period?

SN: We aim to improve the services offered to Egyptian citizens. The most important these projects are sanitation, healthcare and infrastructure projects as well as projects that create jobs for the youth, women and residents of high poverty and unemployment areas, in addition to national projects. We are trying to provide comprehensive and inclusive growth and we do not want to focus all projects in one governorate or one field. This is a main pillar in the ministry’s plan for the upcoming period.

AO: What exactly is the ministry’s plan for the next period?

SN: The ministry’s plan for the next period is based on three pillars, the first of which is choice, by which we mean the choice to implement the state’s programme and fund the people’s services through the best resources. There are several international, Arab and regional financial institutions and each of which has its own competitive advantage and its own field of expertise. In this sense, we will not focus in the next period on getting funds only, rather on choosing the best prices and the best expertise for the project and the shortest execution period.

The second pillar is using acquired loans. We plan to make use of all the loans we have received, especially those which we have not taken advantage of, which limits our ability to get new loans from the same institution. As a result, we decided to cooperate with all the ministries to specify the priorities and the project that are ready to be executed in the coming period so that outstanding projects do not become a hurdle in getting new loans.

AO: What share of the loans given to Egypt is unused, and what will be done with those funds if the projects are not executed?

SN: I cannot announce the figure, but regardless of the percentage the first and biggest loser would be the country and its economy. As for the fate of these funds, it is always for Egypt but we pay interest rates on them without putting them to use which adds to our financial burdens.

AO: What is the third pillar of your plan?

SN: It is clarifying the government’s achievements. Each ministry has succeeded in several accomplishments and in formulating legislations such as the investment law and the industrial zone law. Thus, we are aiming to coordinate between different ministries and link them in the next period. We are also aiming for comprehensive development. For example, it is not acceptable that resources are spent on a single governorate. Our plan is ambitious but also realistic.