My noble Friend the Minister of State for International Development, Latin America and Caribbean, the right hon. Baroness Chapman of Darlington has today made the following statement:
Today, I have laid a departmental minute, which outlines details of a new liability undertaken by the Foreign, Commonwealth and Development Office. The liability is a guarantee for a $200 million World Bank loan to ease Egypt’s economic pressures and support its continued economic reform. This loan was agreed to—in principle—under the previous Government and was paused following the calling of the general election.
It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental minute to Parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until 14 parliamentary sitting days after the issue of the statement, except in cases of special urgency.
A copy of the departmental minute to Parliament has been placed in the House Library.
Egypt has been severely affected in recent years by the Russia-Ukraine, Sudan and Israel-Gaza conflicts. Egypt is an important partner to the UK, in particular as we work together to resolve the conflicts in Gaza and Sudan. This loan guarantee was agreed in principle by the previous UK Government. Egypt’s macroeconomic situation remains delicate, and the country is susceptible to external shocks due to systemic economic and structural challenges. Economic instability would have severe consequences for poverty in the country and for regional stability, and could trigger irregular economic migration to Europe.
A three-year International Monetary Fund programme is conditional on economic and governance reforms. We have already seen these begin to take effect, with a devaluation of Egypt’s currency in March 2024, and the introduction of a floating exchange rate and a cap on public spending.
The UK guarantee will support the second of three planned World Bank development policy financing operations, which will help Egypt address short-term economic challenges while advancing the next generation of complementary structural reforms. The overall effect will be to boost Egypt’s macroeconomic and fiscal resilience. Our indicative interest has already allowed us to influence the World Bank in aligning its loans with the IMF programme, and to push for more rigorous programmatic reforms.
The liability is expected to last for up to 35 years. The FCDO will only pay official development assistance if a default occurs, as agreed with the World Bank. The departmental minute sets this out in detail.
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