AfDB support to Egypt, Tunisia and Morocco

AfDB support to Egypt, Tunisia and Morocco Thouraya Triki, North Africa department, African Development Bank International Conference: After the Awakening, Euro-Mediterranean relations and business opportunities in Egypt, Jordan, Morocco and Tunisia Milan, Italy, June 3 2014

Outline of the presentation Overview of AfDB group Socio-economic context in Tunisia, Egypt and Morocco AfDB support to Tunisia, Egypt and Morocco

The AfDB group at a glance First Development Finance Institution dedicated to Africa. African Development Bank Established in1964 53 RMCs and 25 non- African countries Authorized capital : 103 billion USD Mission: Promote economic growth and alleviate poverty in all Regional Member Countries (RMCs) African Development Fund Established in1972 Subscription: 35 billion USD (donors) Nigeria Trust Fund Creation: 1976 242 million USD 3

The AfDB group at a glance Public window Private window Beneficiaries Governments, public entities Private enterprises, SOE (independent) Guaranty type Sovereign Non-Sovereign Financial terms Concessional Commercial 4

The AfDB instruments at a glance Loans Loans with sovereign guaranty: Mat up to 20 years, up to 5 years grace period, JPY, USD, ZAR, Euro. Possibility to convert into local currency for total flexible loans. Loans with no sovereign guaranty Mat up to 15 years, up to 5 years grace period, JPY, USD, ZAR, Euro and approved local currencies. NTF loans: Max 10 million USD, USD only, could benefit public and private sector, Mat up to 27 years with 7 years grace period. Syndication: parallel co-financing & A/B loan structure 5

The AfDB instruments at a glance Guarantees Partial Risk Guarantee: default risk on commercial debt service payment in a PSO triggered by adverse government actions. Partial Credit Guarantees: part of default risk on debt service payment, regardless of the trigger. Lines of credit to financial institutions Equity & quasi-equity Risk management products Currency, interest rate and commodity swaps, caps et collars. 6

The AfDB instruments at a glance Trade finance Risk participation agreements: Up to 50% coverage, portfolio basis. Trade finance LOC: Mat up to 3.5 years. Commodity Finance Facilities: pre-export financing to aggregators. Technical assistance grants, Economic Sector Work and policy dialogue 7

Historical performance of Tunisia, Egypt and Morocco: hope was in the air! Sound macroeconomic performance during the years leading to 2011 popular uprisings. Significant progress in human development indicators. GDP per Capita ( PPP valuation, $) Annual real GDP growth (2001-2010) Inflation (2001-2010) Population (000) Egypt * 83 958 6 405 4.90 8.40 Morocco 32 599 5 244 4.20 0.50 Tunisia 10 705 9 754 4.50 3.40 Source: African Economic Outlook

..but the devil was in the details Limited Job creation & Economic sophistication Growth thru rise in capital & labor stock Little TFP increase & income/capita growth < ½ % High Youth unemployment Lack of econ sophistication & transformation Myopic global & regional integration Exclusion & Growing Disparities Voice & accountability Growing regional disparities Deteriorating public social services Production Sophistication (1975-2005) Egypt Tunisia Indonesia Malaysia 1975 2005 Perceptions of wellbeing 2007 2010 25 24 22 22 23 20 14 15 12 12 In an international difficult context Deficits and economic contraction in some countries Rising borrowing cost and decreasing FDI Egypt Tunisia Algeria Libya Morocco

The 2011 uprisings: A reality check --- GDP growth (annual), -- inflation, -- cash deficit/surplus (as % GDP), Egypt Morocco Tunisia 20,00 10,00 8,00 15,00 8,00 6,00 10,00 5,00 0,00-5,00 6,00 4,00 2,00 0,00-2,00 20052006200720082009201020112012 4,00 2,00 0,00-2,00-10,00-4,00-4,00-15,00-6,00-6,00

Country outlook 2014/2015 Tunisia Fiscal financing to remain elevated at about 11 billion U.S. dollars per year. Debt sustainability to be monitored, Strong growth and fiscal consolidation are needed Job creation is a priority Reform Implementation capacity and political stability to be followed Morocco Fiscal financing needs and deficit, debt to GDP ratio are expected to decline, inflation under control Declining growth (agriculture) Stronger employment growth is needed Reform implementation capacity to be followed Egypt Fiscal deficit should remain high and domestic public debt should continue to rise (external financing gaps: $60 billion over 2014/15 2017/18 period). Gulf states financial support is difficult to support on the LT Fiscal consolidation is planned after new government takes over; this could foster fiscal sustainability and economic recovery.

AfDB historical engagement in Morocco, Tunisia and Egypt Historically, Morocco Tunisia and Egypt have borrowed the most from the Bank. However post 2011 the portfolio has seen an increase in grant-funded ESW and TA. This has allowed the Bank to remain relevant and ensure a value added approach based on sustained policy dialogue. Cumulative Loans and Grants approvals by Country (1968-2013) 29,3 37,3 10,3 20,5 2,7 Algeria Egypt Mauritania Morocco Tunisia 12

AfDB engagement in Morocco, Tunisia and Egypt (UA millions): 1 UA= 1.55 USD Approvals Active portfolio 1967-2013 As of April 2014 Egypt 3,763.5 1,278 Morocco 6,951.5 2,114 Tunisia 5,383.9 1,021

AfDB Cumulative Approvals in NA by sector AfDB Approvals per Sector in NA 1968-2013 (share in %) Multi-sector 6,1 6 4 6 8,5 15,4 16 19 Energy Transport Agriculture & rural develop Social Water sup/ Sanitation Industry Mining &Quarrying Other

AfDB selected projects in Morocco Project name Public administration reform program Extension and upgrade of 5 airports Ouerzazate solar project CSP (phase I) Industrial energy efficiency program Growth diagnostic Argan Infrastructure Fund Support to financial sector development program (I&II) OCP Investment program Amount (million) 100 Euros 240 Euros 168 Euros 177 UA 0.704 Euros 13.78 UA 162 & 200 Euros 250 USD 15

AfDB selected projects in Tunisia Project name Gabes-Medenine-Ras jedir highway ETAP investment program (2009-2010) Enfidha airport Apex facility to support SME lending Amount (million) 118 UA 150 USD 70 Euros 50 Euros 2 budget supports (2011, 2012) 500 USD each Operationalization of the PPP law 4 USD Support to the implementation of the E-government and open government Evaluation of the BTS microcredit system 0.683 UA 0.140 UA 16

AfDB selected projects in Egypt Project name Abu Qir thermal power plant Egyptian Refinery Company Support to the national franchising program Jabal Al Asfar waste water treatment plant Risk participation agreement with Commercial International Bank Egypt (CIBEG) Study on wind energy integration into the national grid Amount (million) 214.5 UA 225 USD 40 USD 48.6 UA 50 USD 0.490 UA 17

Collaboration with the Deauville Partnership (DP) A G8 Initiative for 6 eligible countries Egypt, Tunisia, Morocco, Libya, Jordan & Yemen. 4 main pillars: Governance; Social and Economic Inclusion; Private Sector Development; Regional Integration. AfDB: Hosted the DP secretariat at launching Implementation Support Agency (ISA) under the MENA Transition Fund (approved UA 8.8 million to date, as ISA for Egypt, Libya and Tunisia) Several collaboration with IFIs (PPP in Tunisia, Support to MSMEs in Organic Clusters and Industrial Waste Management and SMEs Entrepreneurship Hub in Egypt) 18

THANK YOU T.TRIKI@AFDB.ORG 19