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Waiting on the cash
Published in Al-Ahram Weekly on 15 - 08 - 2002

Quick relief funds pledged during the February Sharm El-Sheikh conference are still being negotiated six months on, Niveen Wahish reports
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Six months have gone by since the World Bank's Consultative Group meeting for Egypt was held in Sharm El-Sheikh, yet little is known of how much, if any, of some $2.1 billion of "quick disbursement" money, pledged during the conference, has actually come through. At the time the meeting was held in February, it seemed as though the Egyptian economy had come to a halt, with all eyes fixed on the meeting. Funds were needed to support Egypt's balance of payments, which had been affected by sharp falls in the revenues of foreign currency earners, such as tourism, oil, the Suez Canal and remittances, coupled with an international recession and compounded by the 11 September events.
The $2.1 billion is part of a larger package of $10.3 billion agreed upon for the period between 2002 and 2004.
"Everybody's expectations had been too pessimistic," said Mohamed Kamel Amr, Egypt and Arab world representative on the World Bank's board of directors. "Things are not as bad as we thought." He pointed out that tourism is almost back on track and Egypt's need for liquidity is not pressing as was believed. The element of urgency is no longer there, said Amr, who explained why some $1 billion pledged by the World Bank (WB) and the African Development Bank (ADB) are still being negotiated with the Egyptian government.
Briefing the press on the whereabouts of the pledged sums, Amr said Egypt and the WB are still in the process of negotiating a $500 million loan from the WB and an equal amount from the ADB.
He said that a delegation from the WB and the ADB is scheduled to visit Egypt in September, by which time it is hoped that certain data needed for the negotiations is made available by the government. Although no timetable has been set on when the loan will be signed over, he said that he hopes it will happen some time next fall.
"Nothing major is holding the disbursement of the money up. We want to make sure that the structural programme is well defined," he said, assuring that both parties are "on track to reach an agreement on how the money will be spent". The loan will be directed at structural and sectoral reform.
According to Amr, Egypt is no longer in dire need of WB funds. "But it's good for the economy, not because of the money per se, but because of the expertise gained from dealing with the bank," he said. The money is currently available at 2.5 per cent for periods extending between 15 and 17 years with a grace period of between seven and eight years. Amr said Egypt could also have access to an additional $1.5 billion from the bank if it wishes.
The funds, Amr said, will be directed, among other things, to creating job opportunities in the local market, training graduates and providing micro-finance for youth. Within that framework, a regional centre for financing small and micro industries affiliated to the International Finance Corporation (IFC) is also scheduled to be inaugurated during WB President James Wolfensohn's scheduled visit to Egypt in October. His second to the country in eight years, the visit comes as part of a tour of the region.
A Compensatory Finance Facility sum of $500 million was also to be part of the $2.1 billion package. Because such funding would commit Egypt to certain reforms, the government has not requested to make use of that money. Areas where experts believed Egypt would be required to speed up reform include privatisation and liberalising the exchange rate and the financial sector.
Other contributors to the $2.1 billion include the United States Agency for International Development (USAID) and regional funds such as the Arab Monetary Fund. However, no one was available from the Ministry of State for International Cooperation to provide information as to the status of funds pledged by both the USAID and the regional funds.
For the World Bank money to be disbursed, the IMF's approval is not needed upfront, but the institution has to be "on board", Amr said, since it has to agree on the WB framework and the government's plan. "If the IMF thinks the plan does not fit with what they have in mind, it's not good," he said.
The IMF has been known to insist at times on a stand-by agreement before the money can be paid out from the WB, but, Amr said, the present relationship between Egypt and the IMF appears smooth and a formal agreement might not be needed.


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