Minister of State for International Development, Latin America
and Caribbean (The Rt Hon of Darlington):
Today, I have laid a Departmental Minute, which outlines details
of a new liability undertaken by the Foreign, Commonwealth and
Development Office (FCDO). 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
fourteen 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 (IMF) 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 (DPF) 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 (ODA) if a default
occurs as agreed with the World Bank. The Departmental Minute
sets this out in detail.
