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  • Egypt has implemented an economic reform program to stabilize the economy and address macroeconomic imbalances through the liberalization of the exchange rate, fiscal consolidation, and energy sector reforms. These measures have helped stimulate growth, generate a solid primary budget surplus, reduce the debt-to-GDP ratio, and replenish foreign reserves. Energy sector reforms have eliminated severe power shortages whilst incentivizing investments in renewables. 

    Key legislative reforms to improve the business environment have  also been undertaken, reflecting positively on the country’s sovereign ratings. The Coronavirus pandemic is expected to undermine Egypt’s recovery, however, due to reduced global demand and the pandemic’s  disruptive impact on economic activity.

    Real Gross Domestic Product (GDP) growth increased in Egypt to 5.6% in fiscal year 2019 (ending June 30, 2019), compared to 4.6% in the previous three years. This robust performance was sustained throughout the first half of fiscal year 2020, driven mainly by investments and the improving balance of net exports. Job-creation has been rather subdued, with the share of employed individuals within the working-age population remaining low, at 39%, and may be hindered further by the adverse effect of the COVID-19 pandemic on the Egyptian economy, notably through its impact on domestic production, trade, tourism, and remittances. 

    The Central Bank of Egypt (CBE) has resumed its monetary easing cycle throughout the first half of fiscal year 2020, thus contributing to a nascent recovery in private credit. The CBE cut policy rates successively, following a strong moderation in inflation, which dropped to an average of 5.8%, compared to 14. % during the first half of fiscal year 2019, supported by favorable base effects and contained food inflation. Furthermore, in March 2020, the CBE undertook an additional 300 basis-points policy rates cut, in a surprise move to support credit extension, especially to the private sector, in the face of the negative repercussions of the COVID-19 pandemic. 

    The country’s fiscal accounts have improved, but remain under pressure, mainly due to underperforming tax revenues. The budget deficit declined to 8.1% of GDP in fiscal year 2019, from 9.7% a year earlier. While the primary surplus continued to increase in early-fiscal year 2020, preliminary data indicate that the revenues-to-GDP ratio decreased, especially from VAT, which reflects weaker private consumption. 

    The government debt-to-GDP ratio has dropped sharply (by 18%age-points over the past two years), yet it remained elevated at 90.3% in end-fiscal year 2019, and large interest payments continue to be a heavy burden on the budget. In March 2020, Egypt announced the allocation of EGP100 billion (estimated at 1.6% of the FY2019/20 GDP) as an emergency response package to combat the COVID-19 pandemic in Egypt. 

    While Egypt’s fiscal space has gradually improved, thanks to fiscal consolidation measures in  previous years, the implications of the COVID-19 pandemic might temporarily hinder the budget deficit and government debt reduction efforts. 

    Foreign reserves are at comfortable levels, stabilizing at US$45.5 billion in end-February 2020, covering 8 months of merchandise imports, replenished over the past three years mainly through remittances, the Eurobond issuances, and foreigners’ purchase of Treasury bills and bonds, along with the external borrowing. Exports and FDI are yet to rebound. 

    Concerns remain regarding households’ welfare as real incomes have not yet recovered from the previous two years’ spike in inflation. The poverty rate–based on the national poverty line–increased from 27.8% in 2015 to 32.5% in FY2017/18. Egypt took a number of social safety net measures, including scaling up the existing cash transfer program, Takaful and Karama, adding an additional 60,000 households in March. Another 100,000 households will be added in the new Fiscal Year. 

    The government has also introduced a one-time-off cash payment to irregular workers impacted by the COVID-19 outbreak, targeting 1.5 million workers with EGP500/month for three consecutive months starting April 13, 2020. It has extended post office working hours, used schools as payment sites, staggered payments over several days, and is trying to innovate with e-payments to promote social distancing. It  has also introduced exceptional wage and pension increases (of 14% starting next FY), revised tax exemption thresholds, and raised the minimum wage. 

    The pandemic aside, Egypt is launching another wave of reforms to address longstanding constraints to a strong, private sector-led economic transformation. These s should focus on cutting red-tape, lifting non-tariff trade barriers, fostering a level-playing field between the public and private economic actors, and facilitating access to key inputs (such as land and skilled labor) to cater to the private sector and allow it to expand into more productive sectors, such that it becomes capable of generating more and better jobs that can boost shared prosperity and reduce poverty.

    Last Updated: May 01, 2020

  • 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 resulted in the extension of the CPF to 2021, and which focuses on fighting poverty and inequality. This is informed by rigorous analysis of key constraints to poverty reduction and the creation of 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 that are 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 was designed to remain flexible so that it could respond to the country’s evolving needs, while bringing integrated development solutions that are customized to Egypt’s specific context with world class expertise. 

    The two-year extension granted as part of the PLR endorsed by the Board of Directors in May 2019, positions the World Bank Group to build on its existing strategy  for more  impact through focusing on mobilizing finance for development, human capital development, and enable the transitioning to a digital economy. 

    The 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  on education and health reform programs.

    The World Bank Group is preparing a new Country Partnership Framework 2021–2025 with job creation and inclusion the core theme. The new CPF will address  government priorities and new challenges, utilizing 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: May 01, 2020

  • The Government of Egypt, supported by the World Bank Group, has achieved significant results across all three focus areas under this CPF. Policy reforms supported by the US$3.15 billion Development Policy Finance program, consisting of three operations over a period of three years (2015–-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. 

    Government revenues have been bolstered through the Income Tax Law, while expenditures have been brought under control, especially on wages and salaries (through annual budget instructions and the automation of salary payments) and on energy subsidies through annual tariff adjustments for gas and electricity. The environment for investors has been strengthened by amending the Investment Law, implementing the Competition law, and reforming the industrial licensing regime, which helped reduce the time taken in providing licenses to low risk industries by 80%.  

    The World Bank Group has been supporting the Government of Egypt to mitigate the potential adverse effects of the first wave of reforms on the poor and the middle class. The Bank has helped design and finance key flagship projects and programs using various financial instruments to:  (i) enhance social protection programs; (ii) support sustainable job creation activities; and (iii) improve quality service provision in the country. Some of the concrete and active interventions are summarized below:

    • The Bank has supported the government in designing and scaling up social safety net programs, including the Takaful and Karama cash transfers. Due to the success of this program, US$500 million in Additional Financing for Egypt’s social safety net program was signed on September 11, 2019. The program has reached about 2.6 million households (over 8 million citizens), with its total financing of US$900 million. The expanded project will combine boosting the reach and efficiency of Takaful and Karama with piloting economic inclusion models that provide job training for members of poorer households and links to economic opportunities. Economic inclusion pilots will have a special focus on women and youth.
    • The US$500 million Upper Egypt Local Development Program for Results 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 population of 8 million citizens. The program has benefited about 4,000 firms through interventions to improve the local business environment, including the digitalization of administrative services (construction permits and business licenses), resulting in a 25% decrease in the time required to obtain them; and an increase in occupancy rates in industrial zones by 19% in Qena and 5 % in Sohag. Infrastructure and services investments completed under the Program so far are estimated to have benefited about 5 million citizens, of which half are estimated to be women. Citizens, including women and youth, are actively involved in the identification of capital investments through consultations and feedback mechanisms, with almost 5,000 local citizens consulted so far.
    • The Household Gas Connections Project will provide 2.3 million households residing in rural areas with a reliable, lower cost, grid-connected natural gas supply by 2021. About 1.5 million households have already been served to date.
    • The Sustainable Rural Sanitation Services Program (total US$850 million, including Additional Financing), will bring sanitation services to about 1.73 million people living in highly polluted villages and satellite areas of the Nile Delta, through the construction of household connections and wastewater treatment facilities. The program empowers and incentivizes local water and sanitation companies to deliver effective, inclusive and accountable decentralized services to the communities. It has reached 14,000 households to date. 
    • The US$500 million Inclusive Housing Finance Program aims to improve the affordability of formal housing for low-income households in Egypt and to strengthen the Social Housing and Mortgage Finance Fund’s capacity to design policies and coordinate programs in the social housing sector. As of December 2019, the program has supported the delivery of demand-side subsidies to about 287,600 households across all of Egypt’s 27 governorates. In addition, it has contributed to greater social and youth inclusion, with 20 % of program beneficiaries being women, 70% being below the age of 40, and 18% below the age of 30. It has also prioritized families, with 57% of beneficiaries being married couples with young children. Analysis of the program’s performance shows that on average over the past four years more than 75% of Program beneficiary households were among the lowest 40% of Egypt’s households by income distribution.
    • On March 20, the World Bank activated the Contingency Emergency Response Component (CERC) under the US$530 million Transforming Egypt’s Healthcare System Project, which will provide US$7.9 million to fund emergency response activities related to the COVID-19 outbreak in Egypt. The main objectives of the overall  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, 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. Now the World Bank is supporting Government of Egypt to implement the Universal Health Insurance System.
    • The US$300 million Promoting Innovation for Inclusive Financial Access Project expanded access to finance for micro- and small enterprises in underserved regions, using innovative financing mechanisms, with a special focus on youth and women. The project closed in December 2019. Over its five-year life span the project issued loans to 174,808 Egyptians, out of which: 42% were women, 43% were under the age of 35, and 42% were in underserved regions. The businesses launched from the project loans created 303,213 jobs. In April 2019, the World Bank approved a successor project, Catalyzing Entrepreneurship for Job Creation, which will continue creating jobs and improve economic opportunities for Egyptians, with a focus on women and youth.
    • The US$500 million Egypt Education Reform Project supports a major government effort to improve teaching and learning conditions in public schools, with a focus on: (i) improving kindergarten education: (ii) enhancing the capacity of teachers and educational leaders; (iii) intensive use of digital resources for teaching and learning; and (iv) the introduction of a new, computer-based secondary school exit examination that regulates access to universities. To date, the Ministry of Education and Technical Education has achieved the following: (a) advancing secondary school reforms with a focus on implementing computer-based testing in grades 10 and 11. Grade 10 tests were administered to half a million students nationwide in 2019 thanks to a cutting-edge testing platform and item bank. This also comprised the training of staff to develop test items, test administration and marking, and making scores available to students, school principals, districts and directorates in less than a month from the testing date; (b) developing digital resources mapped to the curriculum of grades 10 and 11, in addition to resources for other grades/subjects (still to be completed); and (c) expanding behavioral training to teachers prioritizing KG1-2 and grades 1-2 teachers.
    • A series of development policy operations has supported policy reforms, contributing to redefining the social contract and strengthening resilience by moving away from subsidized goods to market-based solutions, supporting business environment reforms with the goal of promoting private sector-led growth for job creation, and enhancing accountability and transparency. Importantly, sound fiscal consolidation, supported through the Bank’s DPF operations, allowed the Government of Egypt to redirect fiscal savings to the conditional cash transfers program, food subsidy, and social pensions programs. A follow-up DPF also supported measures to improve access to finance and strengthen financial inclusion, especially for small firms and entrepreneurs through the creation of a movable collateral registry (the first in the Middle East). 

    In addition to financial support, a rich program of Advisory Services and Analytics (ASA) is assisting in the identification and implementation of reforms in Egypt. A selection of Bank executed ASA includes:

    1. Supporting the government in designing and implementing integrated social protection policies aiming to create better efficiency and effectiveness; improve the business climate for private sector growth and job creation (procurement reform, industrial licensing reform, contract enforcement and insolvency, liberalization of the gas market); and foster inclusive institutions and spatial equity (fiscal decentralization reform). 
    2. Building on evidence based, on: the Women Economic Empowerment Report, Poverty and Inequality; opportunities and challenges for private investment and commercial financing in key economic sectors; and the impact evaluation of the Takaful and Karama cash transfer program. 

    Last Updated: May 01, 2020



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

*Amounts include IBRD and IDA commitments


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