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Overview

  • Egypt’s recent macroeconomic and structural reforms stabilized the economy and have allowed the country to enter the global COVID-19 crisis with improving fiscal and external accounts. However, the adverse repercussions of the pandemic have since undermined this recent progress, shedding light on longstanding challenges. These include sluggish private sector activity and job-creation, especially in the formal sector, underperforming non-oil exports and Foreign Direct Investment (FDI), elevated government debt-to-GDP ratio (despite its significant reduction in recent years), below-potential revenue mobilization, and an unfavorable budget structure, with limited allocations to key sectors, such as health and education.    

    Real growth declined from 5.6% in FY2018/19 to 3.6% during FY2019/20, as the COVID-19 crisis caused a year-on-year contraction of 1.7% during April to June (Q4-FY2019/20). Growth inched upward in July to September and October to December (Q1- and Q2-FY2020/21), with the lifting of a nighttime curfew and easing of social distancing measures, albeit remaining low at 0.7% and 2%, respectively. Unemployment declined to 7.2% by Q2-FY2020/21 (after spiking at 9.6% six months earlier), as the initial drop in total employment at the outset of the COVID-19 crisis was reversed, and both labor force participation and employment rates rebounded from their large initial dip, though remaining below potential at 43.5% and 40.4% of the working-age population. Key sectors, such as tourism, manufacturing, the Suez Canal and oil and gas extractives continue to be severely impacted by restrictions on international travel, the slump in demand, and disruptions to supply chains and trade, both domestically and abroad.

    At the outset of the COVID-19 crisis, the government devised an emergency response package worth LE100 billion (1.7% of FY2019/20 GDP). Key measures include an exceptional monetary grant to irregular workers and the expansion of existing cash transfer programs. Forbearance measures were introduced in the form of delayed tax filing and loan repayments, in addition to subsidized credit for targeted sectors. The Central Bank of Egypt slashed policy rates by 400 basis-points to ease liquidity and enable individuals to access credit at favorable terms. This monetary expansion came against the backdrop of subdued inflation, registered at 5.7% in FY2019/20, which further declined to 4.5 percent during the H1-FY2020/21.

    International reserves remain relatively ample, at US$40.1 billion at end-January 2021, although still below their pre-crisis peak of US$45.5 billion. External accounts were still bolstered by remittances, rebounding foreign portfolio inflows, and external financing, notably from the IMF, Eurobond issuances, and an innovative Green-bond. Growth is forecast to decline from 3.6% in FY2019/20 to 2.3% in FY2020/21, in light of the ongoing effect of the pandemic, and especially the renewed surge in the COVID-19 cases since end-2020. The slowing of economic activity is expected to have adverse social implications.

    Under the scenario that the COVID-19 vaccine is steadily rolled out through 2021 and early-2022, Egypt is expected to slowly start regaining its pre-pandemic growth momentum by FY2021/22/23. A downside scenario for growth over the forecast horizon would happen if the vaccination process becomes more protracted or variants of the disease cause further disruption, with lockdowns repeatedly imposed.

    The multi-dimensional health and economic crisis caused by the pandemic underscores the importance of advancing the human capital agenda, fast-tracking digital transformation, and strengthening social protection. A second wave of pending reforms, designed to unleash private sector activity and address Egypt’s long-standing structural challenges, is crucial to create better employment opportunities and improve livelihoods.

    Last Updated: Apr 05, 2021

  • The World Bank Group’s current engagement with Egypt is guided by its Country Partnership Framework (CPF) 2015–19 and Performance and Learning Review (PLR), which have resulted in the extension of the CPF to 2021 and which focus on fighting poverty and inequality.

    These were informed by rigorous analysis of the key constraints to both poverty reduction and creating shared prosperity, and by extensive consultations with the government, the private sector, academia, civil society organizations, and youth groups. The CPF comprises three, interconnected, strategic focus areas consistent with the Government of Egypt’s longer-term development strategy: i) improving governance, ii) improving opportunities for private sector job creation, and iii) social inclusion. 

    The CPF extension supported a key goal of the Bank’s Regional Strategy—the renewal of the social contract—by addressing regional disparities through interventions in Egypt’s lagging regions, and by strengthening the social safety net system, improving accessibility to low-income housing, expanding access to water and sanitation services (especially in rural areas) and household natural gas, and moving ahead with education and health reform programs. The World Bank’s current portfolio in Egypt comprises 14 projects with total commitments of US$5.88 billion. 

    The World Bank Group is preparing a new Systematic Country Diagnosis (SCD) to inform the new CPF 2022–2026, with job creation and socio-economic inclusion the core theme. The new CPF will address priorities identified by the SCD and the Country Private Sector Diagnosis (CPSD), in addition to providing relevant analytical tools and using global knowledge, financial resources, strong partnerships, and the Bank’s convening power to help the people of Egypt reap the fruits of their patience.

    Last Updated: Apr 05, 2021

  • The Government of Egypt, supported by the World Bank Group, has achieved significant results across all three focus areas under this CPF. Policy reforms—backed by the US$3.15 billion Development Policy Finance (DPF) program and consisting of three operations over the three years of 2015 to 2017—have supported Egypt’s homegrown reforms’ program, which is aimed at enhancing the economy, creating jobs, and achieving sustainable growth, especially in the energy sector. Programmatic DPF operations have supported reforms to move the government’s focus from subsidized goods to market-based solutions. The reforms support changes to the business environment, with the goal of promoting private sector-led growth for job creation and improving accountability and transparency. Sound fiscal consolidation, supported by the DPF, has allowed the Government of Egypt to redirect its fiscal savings to the conditional cash transfers program, food subsidies, and social pensions programs. 

    The World Bank Group has been supporting the Government of Egypt to mitigate some of the adverse effects that the first wave of reforms may potentially have on the poor and the middle class. The Bank has helped design, and finance, key flagship projects and programs to do this, using financial instruments to: (i) enhance social protection programs; (ii) support sustainable job creation activities; and (iii) improve the quality of service provision in the country. Its active interventions include:

    • The Bank has supported the government in designing and scaling-up social safety net programs, including the Takaful and Karama cash transfers’ program. Due to the success of this program, an agreement for US$500 million in Additional Financing for Egypt’s social safety net program was signed on September 11, 2019. The program has reached about 3.4 million households (around 12 million citizens); its total financing is US$900 million.  It has expanded its coverage during the pandemic, adding 411,000 households boosting the reach and efficiency of the Takaful and Karama cash transfer program to poor & vulnerable households. Moreover, the project is piloting productive inclusion/graduation models in 8 governorates under the FORSA program. These pilots provide links to economic opportunities through asset transfer, wage employment and training with special focus on women and youth.
    • The Upper Egypt Local Development Program for Results (US$500 million) is improving the business environment for private sector development and local government capacity for quality infrastructure and service delivery to citizens and local firms in two of Egypt’s poorest governorates, Qena and Sohag, which have a combined population of eight million. Infrastructure and service improvements financed by the program are estimated to have benefitted about five million citizens so far. About 3,300 firms have seen improvements, with the digitalization of administrative services for construction permits and business licenses resulting in a 25% decrease in the time required to obtain these services and an increase in occupancy rates in industrial zones in the governorates 
    • The Household Gas Connections Project ($300 million) is targeting 2.3 million  households in rural areas for a reliable, lower cost, grid-connected natural gas supply by 2021. Over 1.68 million households have already been connected, amounting to over 6.7 million people, with over 100,000 poor households receiving subsidies to cover their connection costs. 
    • The Sustainable Rural Sanitation Services Program, (US$850 million, including the Additional Financing), will bring sanitation to about 1.73 million people in highly polluted villages and satellite areas of Sharkia, Dakahliya, Beheira, Menoufia, Damietta, and Gharbia governorates in the Nile Delta, through household connections and wastewater treatment facilities. The program empowers and incentivizes local water and sanitation companies to deliver effective, inclusive, and accountable decentralized services, and is laying the groundwork for sustainable development of the sector by developing its strategy and supporting regulatory and tariff reforms. It has reached 13,700 households to date, with over 220,000 household sanitation connections under construction. 
    • The Inclusive Housing Finance Program-for-Results (US$1 billion, including Additional Finance) aims to improve the affordability of formal housing for low-income households in Egypt and strengthen the Social Housing and Mortgage Finance Fund’s capacity to design policies and coordinate programs in the social housing sector. As of June 2020, the program has supported the delivery of demand-side subsidies to 314,000 households across Egypt’s 27 governorates, with a 75% disbursement ratio. It has contributed to greater social and youth inclusion: over 20% of beneficiaries are women, 70% are below the age of 40, and 18% below the age of 30. It has also prioritized families, with 57% of the beneficiaries married couples with young children. 
    • The Bank-supported Egypt COVID Response Project (US$50 million) was signed off on in July 2020, and will focus on immediate operational challenges and areas identified as critical gaps in Egypt’s national response. Project funds will complement the activities of Egypt’s COVID-19 response plan by supporting costs associated with: (i) procuring and distributing medical equipment, including ICU and laboratory testing equipment and supplies, infection control products, and PPE; (ii) “Corona incentive pay” for healthcare personnel undertaking COVID-19-related tasks; (iii) health worker training; and (iv) operations of designated quarantine, isolation, and treatment centers.
    • In March 2021, the World Bank activated the Contingency Emergency Response Component (CERC) (US$7.9 million) under the Transforming Egypt’s Healthcare System Project (US$530 million), to fund emergency response activities related to COVID-19 in Egypt. The main objectives of the healthcare system project are to: (i) improve the quality of primary and secondary health care services; (ii) enhance demand for health and family planning services; and (iii) support the prevention and control of Hepatitis C. The project benefits nearly 55 million Egyptians nationwide by improving services at 600 primary healthcare facilities and 27 hospitals, supporting Egypt’s family planning efforts and scaling up a community health program to promote better health and nutrition. It also supports the screening of one million units of blood annually using Nucleic Acid Testing to ensure that blood units are infection free and ready for use in the national blood repository, and supports conducting the largest screening campaign of its kind, the 100 Million Healthy Lives campaign, which screened 53 million Egyptian citizens and residents for Hepatitis C, non-communicable diseases, and risk factors, and treated an estimated 1.2 million Hepatitis C patients.
    • The Supporting Egypt’s Universal Health Insurance System (UHIS) project ($400 million) was approved in June 2020. The project will support Egypt to implement the new UHIS, as envisioned in the newly passed Universal Health Insurance Law, including Phase I of the rollout of the UHIS in six governorates: Port Said, Suez, Ismailia, South Sinai, Luxor, and Aswan. The governorates are home to about six million people, out of Egypt’s total population of nearly 100 million. 
    • In April 2019, the World Bank approved the Catalyzing Entrepreneurship for Job Creation Project (worth US$200 million) which aims to create jobs and improve economic opportunities for Egyptians, with a focus on women and youth. This project provides a comprehensive package of financial and non-financial support to traditional MSMEs, innovative start-ups, and high-growth firms. It went into effect in January 2020.
    • The Supporting Egypt  Education Reform Project (US$500 million) supports a major government effort to improve teaching and learning conditions in public schools, with a focus on: (i) improving quality of kindergarten education; (ii) enhancing the capacity of teachers and educational leaders; (iii) the intensive use of digital resources for teaching and learning; and (iv) the introduction of a new, tablet-based school exit examination regulating access to universities. To date, the Ministry of Education and Technical Education has developed and administered new, tablet-based tests for grade 10 and 11 students nationwide, which (a) sets the foundations for the new tablet-based school leaving examinations in 2020/2021 and (b) trains staff to create an item bank, manage the administration and marking of the tests, and makes grade 10 and grade 11 scores available electronically less than a month after students are assessed, to students, directorates, districts, and school principals. Initial training in 2018/2019 covered 1,400 staff; training is expanding to more staff and teachers with the expansion of tablet-based testing to students in grade 12.
    • The Egypt National Railways Restructuring Project (US$600 million), supported the government of Egypt and Egyptian National Railways (ENR) to improve the reliability, efficiency, and safety of railway services by modernizing signals and investing in new tracks. The project upgraded signaling in a total of 57 stations, 22 signaling towers were commissioned (each tower groups two or three stations), 99 level crossings were modernized, and rails were installed along 375 km of the Cairo to Alexandria and Beni Suef to Nag Hamadi corridors. The project supported the renovation of 297.4 km of tracks, surpassing an initial target of 260 km, and has also introduced measures to strengthen ENR’s management capacity and restructure its operations. An estimated 1.4 million daily passengers are expected to benefit from the improvements to these high-density passenger traffic corridors.
    • Approved in March 2021, the Railway Improvement and Safety for Egypt, RISE (US$440 million) will modernize the signaling along the Alexandria-Cairo-Nag Hammadi corridor of the Egypt National Railways network, and help improve safety at select stations and junctions using a safe systems approach, which will include gender, citizen engagement, and disability considerations. The project will introduce reforms, using performance-based funding, in accordance with best international practice, to support ENR to deliver high quality services at a lower cost through the adoption of Public Service Obligation and Multi Annual Infrastructure Contracts. An estimated 1.4 million daily users of the railways will be able to rely on a safer and more reliable service.
    • The Greater Cairo Air Pollution and Climate Change Project (US$200m) was approved in September 2020 and will contribute toward a resilient and sustainable recovery that includes specific COVID-19 measures in support of government efforts to mitigate health and environmental hazards. Activities are focused on building responsiveness and resilience into institutions and systems, with an emphasis on the health sector (treating and minimizing contaminated waste) and service sector (enhancing worker safety and raising awareness on the link between respiratory infections and air pollution). The project aims to support an integrated climate and air quality management plan for Greater Cairo; the construction of an integrated waste management facility; and the financing of a demonstration low/no emission e-bus transport fleet and activities related to running it. These are expected to reduce the burden of air pollution on health and the economy.  
    • Providing technical assistance to help inform policy dialogue and the implementation of a higher education strategy on improving public university graduates’ employability in view of the opportunities provided by a more dynamic business climate and private sector, and sustainable and equitable financing of the public higher education system. 
    • Promoting women’s economic empowerment, this includes through an active engagement and partnership with the National Council for Women, Egypt Gender Assessment Advisory Services and Analytics (ASA), which has led to the delivery of a number of key analytical products through the Egypt National Observatory for Women, including policy papers on unpaid care work, women living under the new normal of COVID-19, women and the ICT sector, and the development of two case studies promoting Gender Equity Models within the private sector.
    • Improving Egypt’s competitiveness and promoting private sector-led, inclusive growth, through analytical assessments to better understand impediments facing the economy. These included an Economic Monitor, released in October 2020, and the Country Private Sector Diagnostic, in December 2020. In addition, the Bank is involved in advisory services and technical assistance to promote knowledge and capacity in areas such as financial sector development, commercial justice reform, and trade facilitation. 

    Last Updated: Apr 05, 2021

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Egypt: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments



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Additional Resources

Country Office Contacts

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