World Bank to provide Cairo with $6bn aid package

By Al Mayadeen English
Source: Agencies
18 Mar 2024 19:08

While some perceive these measures as assisting Egypt's economy in its recovery from rapid inflation and economic shocks in its shipping industry, others contend that they have a counterproductive effect.

A worker prushes traditional lanterns at a shop in front of Giza Pyramids ahead of the upcoming Muslim fasting month of Ramadan, in Cairo, Egypt, Thursday, March 7, 2024 (AP)

The World Bank announced on Monday its plans to provide Egypt with $6 billion in financial support to assist the country with its development priorities.

"Over the coming three years, the World Bank Group intends to provide more than US$6 billion of support to Egypt," a statement published by the World Bank read, noting that the package comprises of "US$3 billion for financial support to Government’s programs and US$3 billion for the private sector (including mobilization) – subject to Board approval."

Earlier this month, Reuters reported that Egypt's Pound hit an all-time low after the Central Bank announced it implemented measures to allow the pound to float freely, accompanied by a substantial increase in interest rates by 600 basis points.

These measures, aimed at "stabilizing" the economy, were reportedly implemented with support from Gulf investments and funds from the International Monetary Fund (IMF). For months, Egyptian authorities had attempted to maintain a specific exchange rate level, approximately 30.85 pounds to the dollar. However, the currency weakened significantly, reaching 50 pounds to the dollar.

The IMF later approved an expanded $8 billion loan package following Cairo's implementation of reforms.

The World Bank, on its part, stated in its release that the new program will focus on "increasing opportunities for private sector participation in the economy," thus enhancing the governance of state-owned enterprises and enhancing the efficiency and efficacy of public resource management.

While some perceive these measures as assisting Egypt's economy in its recovery from rapid inflation and economic shocks in its shipping industry, others contend that they have a counterproductive effect.

Why?

Allowing the Egyptian pound to float freely means its value will be determined by market forces, in particular demand for and supply of dollars.

Egypt's reliance on external financing can increase its exposure to dollar-denominated debt. This dependence on dollar financing can make the country more susceptible to fluctuations in the dollar's value and exacerbate debt repayment challenges.

Moreover, a weaker Egyptian pound relative to the dollar can make imports more expensive, potentially leading to higher inflation and reduced purchasing power for Egyptian consumers.

Subduing the Egypitan masses to the dollar

The work of NGOs and IFIs such as the World Bank and the IMF have been instrumental in concealing the extreme levels of poverty that were induced as a result of neoliberal restructuring.

The case is such in Egypt where policies of restructuration have decimated the productive capacities of the working classes by shifting the economy from industrial to merchant capitalism, plunging many into poverty.

It is worth recalling that similar policies implemented in 2007 and 2008 have resulted in disastrous outcomes for the Egyptian population.

During those years, dollar fluctuations had led to a surge in food prices which tragically resulted in fatalities among civilians waiting in bread queues.