Egypt implemented two debt swap programs with Germany and Italy worth $720 million to implement 120 projects.
The annual report of the Ministry of International Cooperation for 2023, under the title The annual report of the Ministry of International Cooperation for 2023, entitled “International Partnerships for Sustainable Development: Platforms for Policy and Practice,” revealed developments regarding the debt swap program for development during the year 2023, as this year witnessed the signing of a memorandum of understanding, the first of its kind, for a debt swap program with China. This is the first in the history of cooperation between Egypt and China, as well as the first signed by China with other countries.
The report explained that this comes in light of the state’s efforts to expand innovative financing tools, and consistency with the recommendations of the international community aimed at developing the international financing structure.
During the visit of H.E. the Prime Minister, Dr. Mostafa Madbouly, visited China to participate in the Belt and Road Forum. H.E. witnessed the signing of a memorandum of understanding in the field of debt swaps for development between the Arab Republic of Egypt and the People’s Republic of China, where the memorandum of understanding was signed by the Minister of International Cooperation, H.E. Dr. Rania Al-Mashat, and the President of the China International Development Cooperation Agency, President Lu Zhao Hui.
The memorandum of understanding aims to enhance cooperation between the two countries in the field of debt swaps in order to implement development projects, which is one of the innovative financing tools that works to support the efforts of the Egyptian government in partnership with the Chinese side to achieve sustainable development, by using tranches of Chinese debt to implement development projects. The projects to be funded within the program are currently being agreed upon.
The annual report indicated that the debt swap between Egypt and China reflects the strength of cooperation between the two countries, and their desire to explore new horizons and areas of cooperation, in order to enhance the comprehensive strategic partnership between the two countries.
Debt swap between Italy and Germany
The report stated that the debt swap mechanism is a means to enhance the financing available for development projects through signing agreements under which a portion of the debts owed to development partner countries is exchanged, with the aim of reducing the burden of external debt, achieving sustainable development through financing priority projects, and supporting efforts to achieve SDGs.
Over the past twenty years, the Egyptian government has succeeded in implementing a debt swap program with the Italian and German governments, with a value exceeding $720 million. Through nearly 120 projects in various development fields, the value of the swap program with the Italian side reached 350 million dollars to support achieving sustainable development in Egypt in line with national goals. In addition, the government of the Federal Republic of Germany, during the G8 summit in Deauville in May 2011, agreed to offer a debt swap worth €240 million to implement development projects in Egypt aimed at enhancing job creation, competitiveness of the private sector, and energy.
First: The debt swap program between Egypt and Italy:
Egypt and Italy have had close relations since the 1970s, and the implementation of the first phase of the debt swap program for development with Italy began in 2001, during which 54 projects were implemented. The second phase was signed in 2007 and witnessed the implementation of 32 projects, then the third and final phase in the year 2012, during which a number of projects are being implemented; The total amount of the three phases is about $350 million. Through it, many projects have been implemented.
Last May, an agreement was signed to extend the work of the third tranche until 2024 with the Italian ambassador to implement many projects. At the top of these projects, in the food security sector, is the project “Establishing field silos and an information technology system for wheat management” at a value of 416.7 million pounds, and the second phase of the “Development of fish farming in Egypt” project at a value of 138.9 million pounds, and in the environment sector, financing the third phase of the “Solid Waste Management in Minya Governorate” project at a value of 70.5 million pounds.
In 2001, the implementation of the first phase of the program began at a value of $150 million, through which 54 projects were implemented, the most important of which were rural development in western Nubariya, the establishment of schools and the development of education, projects in the field of green transformation, monitoring the production cycle of agricultural crops, and rehabilitation of water supply systems in Beheira Governorate.
In 2007 the implementation of the second phase of the program began at a value of $100 million, through which 32 projects were implemented, the most important of which were the sectors of combating poverty, creating job opportunities, managing solid waste, establishing a wastewater treatment plant in Rubiki, and modernizing Secondary schools, industrial facilities, and the establishment of technical education complexes in Fayoum.
In 2012, the third phase was signed at a value of $100 million, through which a number of projects were implemented and others are being implemented in the areas of food security and agriculture, higher education sectors, civil society support, environmental projects and heritage preservation of projects to empower female breadwinners, establish 10 wheat storage silos, and projects to empower and protect children.
The governance structure of the debt swap program with Italy
The report confirmed that the management of the debt swap program with Italy is carried out through a governance structure to ensure optimal implementation of the agreements and achieve maximum benefit, headed by the Ministry of International Cooperation and the Italian Embassy, through a committee to manage the local compensation for debts headed by the Ministry of International Cooperation and the Italian Ambassador, selecting projects according to national priorities, and a support unit of technical staff to follow up on project implementation in addition to annual meetings to approve debt swap decisions.
Debt swap program with Germany.
The annual report stated that the debt swap program with Germany began in 2011 at a value of €240 million, and so far the first and second phases have been implemented. The first was in 2012, at a value of $70 million and the second phase was at a value of $90 million.
The third phase is currently being implemented at a value of €80 million. The third phas was agreed to be the “School Nutrition” project to combat dropout from education and child labor, and a financing agreement for the electricity transmission project worth €54 million remaining from the third tranche with the Ministry of Electricity and Renewable Energy within the NWFE program.
The governance structure of the debt swap program with Germany
The debt swap program with Germany is managed through a governance structure to ensure optimal implementation of the agreements and achieve maximum benefit through the Ministry of International Cooperation coordinating with the German side regarding projects, negotiating with the German Construction Bank and the beneficiary national entities, and finalizing the technical details and the financing agreement.
For more details about the annual report of the Ministry of International Cooperation