The Ministry of International Cooperation announced the approval of the Board of Directors of the World Bank Group to provide financing worth $700 million to the Egyptian government. This is within the framework of the Development Policy Financing (DPF) to support the country’s transition towards more private sector participation, enhanced macroeconomic stability, and a green transition.
The Ministry of International Cooperation coordinated the design and implementation of several structural reforms across ministries and government agencies.
On behalf of the government, and in coordination with relevant national entities, the Ministry of International Cooperation negotiated the DPF programme with the World Bank Group, which is consistent with the Egypt- World Bank Group 2023 - 2027 Country Partnership Framework (CPF); working to support the state’s efforts in implementing structural reforms that enhance the competitiveness of the economy and stimulate private sector participation in development efforts, in line with the state ownership policy document.
The DPF is one of the tools of the World Bank Group which enhances budget support in member countries, supporting efforts to implement various reforms, based on a set of policies and procedures that countries implement to enhance macroeconomic stability and achieve positive results on several levels.
The DPF, approved by the World Bank, aims to achieve three main pillars: enhancing the competitiveness of the Egyptian economy and improving the business environment, supporting macroeconomic resilience, and stimulating the green transformation. This is being implemented through a matrix of procedures and policies under each of these pillars.
The Ministry of International Cooperation highlighted that an agreed upon matrix of policies and procedures has been curated in cooperation with relevant national entities, namely the Ministries of Housing, Finance, Justice, Electricity and Renewable Energy, Environment, as well as the Egyptian Financial Supervisory Authority, Egyptian Competition Authority and the Information and Decision Support Center (IDSC).
Pillar 1: Enhancing Competitiveness of the Egyptian Economy and Improving Business Environment
● Refer a draft law to oversee, monitor and regulate State Ownership in State Owned Enterprises to the Parliament.
● Amend some of the provisions regarding Executive Regulations of Law 152/2022 with new provisions on competition and prohibition of monopolistic practices to implement merger control, and limit anticompetitive effects through remedies.
● Refer a draft law on small claims to the Parliament to enhance commercial justice.
Pillar 2: Building Macroeconomic Resilience & Stability
● Eliminate tax and fees exemptions to State entities in economic and investment activities; and (ii) issued MoF Decrees to gradually roll-out the system that standardizes the principles and criteria for calculation of wages and salaries tax.
● Improve competition and efficiency in the domestic debt market and reduce the cost of government funding by including rules and incentives to improve competition, transparency and increased secondary market trading.
● Enhance transparency and monitoring on the fiscal position through amendments to the Unified Public Finance Law to improve fiscal reporting by including economic authorities in the definition of the general government.
Pillar 3: Supporting Green Transition
● Establish a management system to support climate change mitigation and adaption by creating a working group to support the national monitoring, reporting, and verification system (MRV), and to allow Egypt to collect data on GHG emissions, track progress on mitigation and adaptation measures.
● Enable the development of the voluntary carbon credit markets through main building blocks of the domestic carbon markets: (i) the requirements for validation and verification bodies (VVBs) approved by FRA for both international and domestic bodies; (ii) the requirements for domestic voluntary carbon credit registries approved by FRA; and (iii) the listing and delisting rules for voluntary carbon credits.
● Increase the share of renewable energy in the generation mix and private sector participation and reduce the carbon footprint for a competitive economy by governing direct renewable electricity supply between private producers and consumers (private-to-private) including the use of transmission networks.
● Improve the governance and financial viability of the national power utilities as the Egyptian Electricity Holding Company (EEHC) approved a loss reduction plan with annual distribution loss reduction targets for the distribution companies owned by EEHC, and mandating said electricity distribution companies to achieve set targets.
● Improve climate adaptation and financial sustainability of the water and sanitation sector by submitting to the parliament a draft law on regulating drinking water and sanitation utilities, which brings in reforms to strengthen the regulator's role, implement cost reflective tariffs, and enable private sector participation.
Structural reform actions and policies implemented within the budget support financing of the AfDB & the Korea’s EDCF:
Pillar 1: Encouraging Private Sector Investments
- Establish the Supreme Investment Council.
- Amend Investment Law No. 72 of 2017 to add new incentives and more flexible standards for investment projects
- Eliminate exemptions from taxes and fees for state-owned enterprises with investment activities
- Establish the Egyptian Intellectual Property Authority
Pillar 2: Supporting Economic Diversification and Green Transition
- Legalize unlicensed industrial facilities
- Expand the areas allocated for growing high-quality cotton seeds
- Allocate 26 thousand square kilometers of state-owned land for renewable energy investments
