Minister Lauds AfDB’s Support For Sustainable Infrastructure Financing In Egypt

Posted by Eric Ojo Latest Headlines, News Around Africa Sunday, May 21st, 2023

(AFRICAN EXAMINER) – Egypt’s Minister of International Cooperation, Dr Rania Al-Mashat has commended the African Development Bank (AfDB) for its collaboration and support for the implementation of sustainable infrastructure projects in his country.

The minister gave the commendation shortly after the Board of Directors of the AfDB approved a Partial Credit Guarantee of $345 million equivalent in Renminbi to Egypt to increase access to the Panda bond market to finance green and social projects.

The bank is supporting Egypt’s efforts to tap the Panda bond market to advance the renewable energy and sustainable water management sectors among others.

Egypt has been active in the sustainable and green bond markets since 2020 when it issued the MENA region’s first green bond. In 2022, ahead of the COP-27 conference which was held in the Red Sea resort of Sharm El Sheikh, the Egyptian ministry of finance launched the country’s Sovereign Sustainable Financing Framework (SSFF). to further underline its support and commitment to use various instruments for the financing of green projects.

Beyond green bond issuances these instruments include sustainable, social, blue, sukuk and others debt instruments. The framework sets out procedures and rules for resource use, project selection, monitoring, and evaluation in line with international best practices.

The project will promote inclusive growth and advance Egypt’s green and social objectives. The sectors set out under the SSFF align closely with the bank’s country strategy for Egypt as well as its High-5 operational priorities.

Dr. Al-Mashat said Egypt’s new agreement with the AfDB provides an additional dimension to the strategic partnership, which is focused on promoting the transition towards renewable energy and financing sustainable infrastructure projects.

“Issuing international bonds in an untapped new market, backed by the African Development Bank, helps diversify financing sources and builds on previous efforts, including the green bonds launched in 2020”, she said.

The new partial credit guarantee will allow Egypt to raise the equivalent of $500 million in the Panda Bond market, which are bonds denominated in Chinese yuan issued by foreign borrowers.

Bond proceeds will be used for clean transportation; renewable energy; energy efficiency; sustainable water and wastewater management; financing for MSMEs, and essential health services initiatives, among others. These sectors are prioritized under Egypt’s SSFF.

Speaking in the similar vein, Egypt’s Minister of Finance, Dr. Mohamed Maait said: “I would like to express the appreciation of the Egyptian authorities to the African Development Bank for their unwavering and continued support to the Egyptian economy, which reflects a deep confidence in the strength of our economic performance and proves the outstanding and deep-rooted cooperation history between Egypt and the African Development Bank.

“I believe that this step, leading to the issuance of a Sustainable Panda bond in the Chinese financial market, paves the way to explore new avenues to meet our strategic goals by entering new markets and widening our investor horizon, as well as achieving Egypt’s vision 2030 targets.

“I seize this opportunity to recall the significant role of the regional and multilateral development banks to finance the development needs of the developing countries, in particular in the African continent, and to facilitate the penetration of the middle- and low-income countries to the financial markets at affordable rates. A task that we urge all our partners to consider expanding and easing its terms”.

Also in his remarks, AfDB’s Director General for North Africa, Mohamed El Azizi described the approval as historic, noting that Egypt will be the first African country to issue a Panda bond and, as the African Development Bank.

“It is our pleasure to provide support to Egypt to enable them to access the market. This partial credit guarantee will enable Egypt to enhance its credit rating and catalyze financing from international investors on competitive terms and pricing”, he added.

On his part, the bank’s acting director for Financial Sector Development, Ahmed Attout said the AfDB’s support will play a counter-cyclical role in supporting Egypt in this transaction, especially during these periods of international investor aversion for African capital markets debts.

“A successful Panda bond issuance by Egypt through the Bank’s PCG will pave the way for other regional member countries looking to diversify their funding sources and tap into international debt capital market”, he stressed.