EIB’s Scannapieco Lauds Egypt’s Reform Program

CAIRO - 6 September 2019: Egypt’s economy “has been rapidly improving, following the implementation of the economic reform program thanks to the flotation of the Egyptian pound and a number of drastic reform measures,” Vice president of the European Investment Bank (EIB) Dario Scannapieco tells Business Today Egypt.

Scannapieco believes that the economic recovery has benefited from surging gas production, a pickup in tourism revenues and remittances. “This economic performance was reflected in the country’s stable credit rating,” he says.

The EIB has provided EUR 4.4 billion of financing over 2014-2019 to support the development of Egypt’s SMEs, as well as financing strategic projects in the transport, energy, water and wastewater sectors.

We sat down with Scannapieco to further discuss the situation of Egyptian economy and the role played by the EIB, including the projects that will receive the bank’s funds this year and top priority sectors.

Tell us about the growth of EIB investments in Egypt, following the launch of the reform program.

In the past few years, we stepped up our operations to support the ambitious plans of the Egyptian government and to support the local economy’s resilience. Our finance volume increased to EUR 1 billion last year from EUR 352 million in 2014, with a total volume of almost 3.6 billion over the past five years.

The EIB financing mainly serves to improve vital infrastructure in the country, across transport, energy, urban development, water and wastewater, as well as to support private sector development, in particular SMEs.

Can you further elaborate on the bank’s investments in 2018, and whether you provided grants during that year?

In 2018, the bank signed finance agreements worth EUR 1 billion, mainly to improve access to finance for SMEs as well as the water and wastewater infrastructure in the country.

The Kitchener Drain depollution project is an example of projects financed in 2018. The project will reduce pollution in the 69 km long Kitchener Drain.

Another example is the expansion of Kafr El Sheikh Wastewater Treatment Plant. The bank signed a finance agreement amounting to EUR 77 million and will manage a grant of EUR 15 million from the EU Neighbourhood Investment Facility.

The bank also signed a grant agreement with the Medium, Small, and Micro Enterprises Devel- opment Agency (MSMEDA) for EUR 15 million to support a Community Development Program. This grant is funded by the EU under the Neighbourhood Investment Facility (NIF) and will finance investments in community infrastructure to improve living standards for disadvantaged and vulnerable persons living in and around urban centres in several governorates in Egypt.

How much have you provided in finance to Egypt so far in 2019?

In 2019, until the present, the bank signed finance agreements for EUR 729 million in total to support clean and efficient transportation in Cairo, as well as SMEs. Our financing always aims to improve people’s lives and make a difference. For example, the Cairo Metro Line 1 project involves EIB financing of EUR 350 million, used to renovate the oldest underground lines in Cairo serving millions of passengers.

In 2019, we are examining more important financing projects, mainly in the sectors of clean transportation and wastewater treatment.

What are the new projects that will receive EIB financing this year?

The EIB board approved the Alexandria West Wastewater Treatment Plant expansion and upgrade project. The project will increase the capacity and upgrade the treatment level of the plant, improving public health and promoting sustain- able economic development. In addition, we are appraising more projects in many sectors of the economy, both public and private.

What are the top priority sectors for receiving EIB funding?

The EIB mandate includes different areas of intervention. Vital infrastructure development is the natural one, as the EIB has accumulated strong technical and financial expertise over the years. As such, the EIB has contributed to a number of strategic projects in Egypt, including the recent new Cairo metro line. Equally, the EIB is committed to support access to finance for micro, small and medium businesses. In the past 4 years, 51% of our finance was dedicated to SME support through credit lines that we extend to our local partners in Egypt. In addition, the EIB provides funding for microfinance institutions and venture capital funds.

How do you assess the reform measures taken so far? What do you see as challenges?

The economic situation has been rapidly improving following the implementation of the economic reform program thanks to the flotation of the Egyptian pound and a number of drastic reform measures that include the gradual removal of fuel and electricity subsidies, as well as issuing new investment and bankruptcy laws. The economic recovery benefited from increased gas production, better tourism revenues and remittances. This economic performance was reflected in the country’s stable credit rating. Egypt’s credit rating remains stable, with both Moody’s and Fitch assigning it a positive outlook at current (B, B3, B).

How is the EIB helping to promote Egypt’s private sector, SMEs and women’s empowerment?

Access to finance is a major obstacle in the business environment, affecting 40% of small firms in Egypt according to the EIB/EBRD/World Bank Enterprise Survey. For this, the EIB has been providing Egyptian banks with much needed long- term foreign currency funds that they pass on to SMEs. The EIB has provided EUR 2.1 billion of finance to Egyptian banks to lend to SMEs. Through its mainstreamed gender strategy, the EIB strongly encourages women entrepreneurs; and companies managed by women receive EIB finance.

In addition, the EIB is a key player in supporting the private sector, offering a broad range of financing solutions for international companies investing in Egypt, sizable Egyptian companies – including commercially managed public sector companies— as well as mid-caps with strong development potential and/or added value to the local economy. The EIB provides long-term maturities, favourable margins and sector expertise, thereby contributing to improving the project’s quality. In addition, the EIB provides advisory services for capacity building to its financial intermediaries and entrepreneurs.

What is Egypt’s share in the EIB’s regional investments?

Egypt is a key beneficiary of the bank’s financing in the region. During 2014-2018, Egypt’s over- all share of EIB financing reached 44%. EIB’s financing went to projects that make a difference in people’s lives.

How much has the bank invested in Egypt’s economic sectors?

The European Investment Bank has provided EUR 4.4 billion of finance during 2014-2019 to support the development of small and medium enterprises (51%) as well as to finance strategic projects in the transport (19%), energy (20%), water and wastewater (10%) sectors. Examples of recently signed projects include the Kitchener drain, Fayoum wastewater expansion plant and the second tranche of a credit line to National Bank of Egypt.

Do you support climate-related projects?

The bank is a world leader in providing climate financing. In Egypt, we have been financing projects in renewable energy generation and energy efficiency, projects that have an impact on climate change mitigation. The Gulf of Suez Wind Farm is an example. The Wind Farm, which lies on the west coast of the Red Sea in Egypt about 150 km north of Hurghada, with an installed capacity of 200 MW and a capacity to generate 650 GWh per annum, will meet the electricity needs of about 370,000 consumers. This equates to 289 955t less CO2 entering the atmosphere every year.