IFC stands by Egypt to mitigate the economic fallout from coronavirus

 International Finance Corporation’s (IFC) Country Manager in Egypt, Libya, and Yemen Walid Labadi said the corporation has allocated $8 billion of financing globally to support businesses affected by the COVID-19 pandemic Sun, Apr. 12, 2020
CAIRO - 12 April 2020: International Finance Corporation’s (IFC) Country Manager in Egypt, Libya, and Yemen Walid Labadi said the corporation has allocated $8 billion of financing globally to support businesses affected by the COVID-19 pandemic, especially in the tourism and manufacturing sectors.

Speaking to Ahram Online, Labadi added that Egypt is a country of priority for the IFC’s provided finance, stating that the private sector needs the utmost support, being the backbone of Egypt’s economy.

How is COVID-19 affecting the global economy?

The global economy is facing unprecedented challenges in the wake of the COVID-19 outbreak. Not only is the pandemic exacting a heavy human toll, it is also creating deep uncertainty, disrupting economies around the globe on both the supply and demand sides, and sending financial markets into a tailspin.

How do you view the preventive measures being taken to contain covid-19 impacts, especially in Egypt?

Many countries, including Egypt, have implemented quarantines and encouraged social distancing, which will help save lives. But at the same time, those safeguards are weighing on the global economy. Stock markets are faltering, consumer spending is down, oil prices are plunging, and international supply chains have been severed, hampering manufacturers. The entire tourism industry has gone into hibernation. Moreover, small businesses, the backbone of most economies, are under severe stress.

What is the impact of coronavirus on developing countries?

Well, the crisis is now rippling through the developing world, which is expected to be the worst affected because these countries have weaker health systems, higher poverty levels, and non-diversified economies.

Commodities account for 75 percent or more of exports in some countries, while others depend on travel and tourism to sustain over 20 percent of their GDP.

The exact economic toll of the coronavirus pandemic is impossible to predict. The IMF announced that the global economy has entered a recession because of the coronavirus crisis. But the depth of the recession will depend on how quickly governments can shift public behaviour and implement social distancing practices. The more they are able to contain the virus, the shorter the disruption will be and the less lasting damage it will cause.

What is the IFC's estimate of the impact of COVID-19 on Egypt’s economy?

We expect the buoyant growth momentum that has been characteristic of Egypt’s economy for the past two years to slow down. We expect consumer spending to fall, along with private investment and foreign direct investment. Travel restrictions will weigh on the tourism industry, which is a huge part of Egypt’s economy, and healthcare costs will rise.

How is the drop in oil prices affecting the global stage?

The sharp drop in oil prices will also take a toll on the economy, leading to a decline in remittances as countries around the world could scale back their projects.

What is the effect of the pandemic on the SMEs sector, being the main sector the IFC works on in Egypt?

Companies of all kinds, particularly small and medium-sized enterprises, have been badly hurt. We have seen waves of layoffs and some businesses have closed, at least temporarily.

A further risk to this outlook is a major local outbreak of the virus that will put a hold on all production activity in Egypt as factories and companies shut down, severely impacting supply levels while extending the negative impact on foreign exchange sources.

In light of the latest meeting with Egypt’s Minister of International Cooperatio Rania El-Mashat to discuss the international support for Egypt against the harsh impacts of COVID-19, what is the IFC doing in this regard?

There are difficult times ahead, and we stand by the country to mitigate some of the economic fallout by supporting the private sector, which is the backbone of Egypt’s economy.

Did the IFC set specific allocations for Egypt to back it in the fight against coronavirus?

In early March, the IFC, a member of the World Bank Group, announced up to $8 billion of financing globally to support businesses affected by coronavirus. Our goal is to buttress economic sectors directly affected by the outbreak, such as tourism and manufacturing, and help companies to continue to pay their bills and their employees. We’re still early in the process, but Egypt is a country of priority for us and we’re considering businesses here we can invest in.

How will the finance provided by IFC be used, and what are the sectors that will benefit from it?

The financing is part of a $14 billion relief package announced recently by the World Bank Group. The IFC’s support will focus on three areas. First, we’re providing $2 billion to support our existing clients in sectors like manufacturing, agribusiness, and healthcare. The financing will help them preserve jobs and weather the coronavirus storm. Second, we’re earmarking $2 billion to encourage cross-border trade, which will keep essential goods flowing between countries. Third, we’re providing $4 billion to emerging-market banks, allowing them to ramp up lending to businesses, which need working capital to pay their bills and employees' salaries.

According to IFC tracking, what are the sectors that will be impacted harshly by the covid-19 outbreak in Egypt?

With the current lockdown and the ban on travel, the outbreak will impact the tourism, manufacturing and financial sectors. The virtual shuttering of the tourism industry can be especially hard on Egypt. The sector is a major employer and contributes 12 percent of the country’s gross domestic product.

How is Egypt affected financially by the coronavirus?

On the financial side, Egypt’s stock market has dropped significantly during the past few weeks, reaching its lowest level since 2016. That’s of course on par with what we’re seeing globally as investors head to safe havens. Finally, industries relying on consumer discretionary spending, like retail, and cross-border supply chains, like car-makers and chemicals producers, will likely come under stress.

How is the current crisis affecting the IFC's work in Egypt and globally?

Naturally, it has made logistics more complicated. Face-to-face meetings with our clients, for example, have become challenging. But we use a host of virtual tools to stay in contact with our clients and we make sure to provide the support they need during this difficult time. We’ve also signed virtually an investment in a regional private equity fund that will extend financing to companies in Egypt, Morocco and Tunisia. So I can proudly say this outbreak hasn’t impacted our mission. We’re more devoted than ever to working with the private sector to create jobs, improve services, and lift Egyptians out of poverty.

Globally, the IFC is already working with approximately 300 companies in response to the coronavirus pandemic. The corporation will provide direct lending to companies affected by the outbreak and support financial institutions so they can continue lending to businesses. This will help companies to continue to operate, and workers to continue to receive paychecks during these trying times.