Struggling Egypt Seeks $3 Billion Loan from World Bank

Egypt has been in talks with the World Bank in an effort to obtain a $3 billion loan. The North African nation needs the funds to support its budget according to Finance Minister Hany Kadry Dimian.

On Wednesday, the Egyptian government announced that it would receive $3 billion from the World Bank over the coming three years. However, the government later clarified that statement, indicating that the deal was still in negotiations.

Egypt has been in talks with the World Bank in an effort to obtain a $3 billion loan. The North African nation needs the funds to support its budget according to Finance Minister Hany Kadry Dimian.

On Wednesday, the Egyptian government announced that it would receive $3 billion from the World Bank over the coming three years. However, the government later clarified that statement, indicating that the deal was still in negotiations.

Reuters reports that Egypt’s economic woes stem from a shortage of foreign currency. Egypt has been enacting a number of measures to overcome a dependence on foreign currency and to climb out of the hole created by the current shortage. The shortage began in 2011 when the nation went through an uprising, scaring off both tourists and foreign investors. To date, the shortage of foreign currency has crippled import activity and hurt foreign investment, hampering efforts to rebuild the already teetering economy.

Earlier this week, the Egyptian government announced that it would receive $1.5 billion from the World Bank and African Development Bank (AfDB). It also expects to obtain another $2.5 billion later this year from land sales to Egyptians living abroad. The remaining $3 billion, should it come through, would be received over three years and help to subsidize the country’s budget shortfalls.

Economists believe that Egypt’s current financial crisis will ease if the nation can find a way to restart its once vibrant tourism industry. Tourism slumped severely following the 2011 uprising and has yet to recover. Lowering Egypt’s $1 billion energy import bill is also high on the agenda for needed reforms. Although the nation has tried to reduce government spending on energy, Egypt’s Finance Minister says the latest World Bank loan will help finance and stabilize Egypt’s state budget.

The Prime Minister, Sherif Ismail, also weighed in on the possible World Bank loan. “The government is aware of the economic conditions which we’re passing through, and there is a deficit in the budget and we have to handle it gradually,” he said.

Although Egypt’s economy grew by 4.1 percent during the last fiscal year, this growth has been too low to affect the nation’s high rate of unemployment. The nation’s currency crisis also ties to an Egyptian pound that many economists believe is significantly overvalued, which has cut deeply into the nation’s reserves since the 2011 uprising. Yet, despite it all, the Egyptian government wants to decrease its annual budget deficit by 1.5 percent, while increasing the annual growth rate by 1.5 percent.