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Solar panels in Egypt

The country has faced large budget deficits due to rising expenditure and the impact of economic uncertainty that has led to lower tax income. The country is in the midst of an energy crisis that saw capacity fall to 20% behind demand, causing regular blackouts.

The funds will support the government in implementing “bold reforms” that Aly Abou-Sabaa, the AfDB’s vice president for agriculture, water, human development, governance and natural resources said will put Egypt’s economy on a path to sustainable and inclusive growth.

In 2014 the Egyptian government announced plans to achieve this through structural reforms, the promotion of investment and the protection of the poor. It has also set out plans to boost macroeconomic stability through fiscal controls and action to constrain inflation.

Abouu-Sabaa said the country is making “excellent progress”, and the AfDB’s loan would now be targeted at enhancing revenue collection and improving public finance management and internal audit, as well as reprioritising expenditure.

Improvements to energy security will also supported through measures to improve governance and efficiency in the energy sector as well as new laws to encourage investment.

The European Investment Bank and the European Bank for Reconstruction and Development have also both recently lent their financial support to the country’s energy sector.

The AfDB’s financing is the first of three single-tranche budget support schemes to be offered to Egypt. Two similar loans – of amounts are yet to be determined – are expected to be offered in 2016 and 2017.