CAIRO: The European Investment Bank (EIB), the EU’s main financing institution jointly owned by the 27 European Union countries, plans to offer €6 billion in loans to the Arab region in the coming years, of which €1.5 billion will go to Egypt.
“I would expect that we could lend, in the next two years, €1.5 billion to Egypt,” EIB President Philippe Maystadt told Daily News Egypt Thursday, adding that much of this financing has already been “identified in pipeline projects.”
Earlier Thursday, the President of the European Commission, Jose Manuel Durao Barroso, who travelled to Egypt alongside Maystadt, said that there are already “nine Egyptian projects in the pipeline for the coming 12 months, worth well over €1 billion.”
The EIB president also explained that the bank plans to diversify its portfolio in the Egyptian market to better reflect the needs and priorities of the new Egyptian government.
Traditionally, the EIB has focused on financing projects in Egypt’s energy sector, which Maystadt stressed will continue into the future, and is “still important for the development of the Egyptian economy.”
“But, the EIB will also give emphasis to other sectors, which are in line with the priorities of the new government,” he explained.
According to Maystadt, he met earlier in the day with Egyptian Prime Minister Essam Sharaf and discussed the idea of funding an “integrated and sustainable development program” to address the “need for more social housing” in Egypt.
“The idea is to combine the financing of infrastructure [with] credit lines to small enterprises, to contribute to the implementation of the program,” he described.
The EIB plans to put €100 million into a “pilot phase” for this program by December, Maystadt went on to explain, adding that such a project would also enjoy funding from the Egyptian government and grants from the EU, alongside the EIB loan.
Turning to the issue of the negative perception amongst the Egyptian public for receiving foreign loans, Maystadt explained that he understood the government’s hesitations with accepting foreign loans, but said that it shouldn’t pose an issue to the EIB’s activities in Egypt.
"I asked [about] this issue to the prime minister and the minister of finance, and I think they’re right to be prudent and very cautious about borrowing, because they do not want to increase the debt to much. So I fully understand this.”
According to the bank’s head, Egypt’s restrictions on foreign borrowing stem mainly from receiving loans for its general budget, whereas the “EIB is something different,” because it involves “borrowing for productive investments.”
As a result of receiving “a return from the investments,” the Egyptian government said they would still accept funding from the EIB, especially for “priority projects, which can have an impact,” Maystadt said.
He also went on to downplay the impact that Egypt’s recently downgraded credit rating will have on EIB lending in the country.
The EIB enjoys “EU guarantees” that protect loans made to foreign governments, he noted, meaning, “for the bank itself, nothing has changed.”
“Of course, we will continue to apply our usual credit risk guidelines,” he added, “So this means that we’ll look at each project on its own merits.”
This same formula also applies to the private sector, Maystadt went on to explain.
“For lending to private sector, we look at this on a case by case basis. For some borrowers, who have a high credit quality, we will lend on better conditions. For other private borrowers, we will apply a risk premium, but these are the usual rules.”