The OPEC Fund for International Development (OFID) secured $165m in financing for the Egyptian market from January to the end of June. Saud Al-Rajhi, a member of OPEC’s private sector finance and trade department, said the first half funds included $95m for micro enterprises, $30m to import supply commodities, and $40m to import petroleum products.
Al-Rajhi said, in an interview with the Daily News Egypt, that the fund approved $270m for Egypt during the last fiscal year (FY), aimed at supporting micro-enterprises, achieving food security through the import of commodities, and financing the import of petroleum products.
He expected the fund’s access to the Egyptian market to reach about $220m by the end of this year. He also said that this depends on the continuation of funding requests to proceed at the same pace considering the credit criteria of the fund.
The OPEC fund is an intergovernmental and development institution established in 1976, based on a decision by the heads and leaders of the Organization of the Petroleum Exporting Countries (OPEC) in their meeting in Algeria some 40 years ago.
The objective of the fund was to support budget accounts in developing countries and to promote cooperation among OPEC member states and developing countries, according to Al Rajhi.
He explained that the activity of the fund branched out to finance basic projects in countries, then started with the private sector, and finally financing trade.
Furthermore, he added that the fund is currently worth $7bn after member states raised their capital for the fourth time in 2011, and expected to increase its capital in the coming period, especially as its founders continue to pump proceeds of the fund into new projects.
Moreover, he pointed out that the fund has been operating in Egypt since its foundation and that it cooperates with all parties in Egypt, whether governmental or institutional, making Egypt one of the first beneficiaries of the fund’s resources.
Additionally, he said that the fund participated in financing 80 projects in Egypt with an investment cost of about $16bn, which includes government projects and the private sector in addition to trade funds.
Over and above, he pointed out that the total funds injected into Egypt, since its inception, reached 10% of the total value of the projects it financed, amounting to $1.6bn, half of which was to the private sector, while the other half was funnelled to finance the private sector and trade, noting that funding accounted for 50% of the total cost of some projects.
The OPEC fund for the public sector in Egypt amounted to $749.8m, divided by $332.4m for the energy sector, $163.2m for agriculture, $160m for other sectors, $37m for health, $20m for education, $14m for the government debt sector, $14m for the transport sector, and $8.7m for the financial sector, according to the official website of the fund.
Also, according to the website, the last three funds in Egypt included the General Company for Silos and Storage worth $14m to build grain silos in Port Said, increase capacity, and reduce losses. The second was to finance small and medium-sized enterprises (SMEs) worth $95m, and the third was designated to facilitate import of petroleum products worth $637m.
In addition, he added that the fund contributes to facilitating the work of 17 working banks in Egypt and has secured letters of credits for trade valued at $200m since 2006.
What’s more, he pointed out that since 2006, which witnessed the start of the programme of financing trade at the fund, the OPEC fund adopted about $550m to finance imports to Egypt, many of them in partnership with the International Islamic Trade Finance Corporation (ITFC), and included the purchase of commodities such as petroleum and its products, wheat, and food supplies.
He pointed out that the fund works according to funding programmes spanning three years, which are revised annually. This programme is presented to ministries and government agencies to assess if they match reality before being approved by the fund’s management.
“All programmes are assessed in the first, second, and third year. If any of the programmes do not match reality, they are amended to match the changes. In the past years, the fund focused on the roads and irrigation. Most recently, it focused on electricity production. We aim to cope with the changes to support what the market requires,” he stressed.
Furthermore, he said the fund is currently focusing its funding on electricity generation, roads, and irrigation, and if the government asks for new funding for health, education or otherwise, its board will not hesitate to consider funding.
He added that the fund receives funding requests from the Egyptian government, some of which are under study. The latest request was to provide $95m to support micro enterprises through the Social Fund for Development (SFD), which was renamed the Micro, Small and Medium Enterprises Development Agency (MSMEDA).
He pointed out that this financing is not the first for SMEs, and that when dealing with the fund started, it was positive and gave positive results, creating keenness on providing new support to the fund, especially since the OPEC fund’s policy focuses on funding the neediest projects.
Additionally, he said that the fund has adopted a new funding programme of $95m to cooperate with the SFD last June, and will focus on financing professions for women, small farmers, fishermen, and entrepreneurs.
In 2015, the fund had approved about $40m for the SFD under a previous programme with the Social Fund. At the end of last month, the fund approved the new funding in preparation for its disbursement after the completion of legal proceedings.
Al-Rajhi predicted that the new funding will reach between 30 and 40,000 beneficiaries, according to specific conditions determined by the SFD.
He said that the fund is always considering financing new projects in Egypt whether for the public, private or trade sectors, but not all projects are approved by the fund.
“We are always keen on consulting with all Egyptian enterprises to find projects to fund. Not more than a month passes before we speak with Egyptian institutions to study the extent to which we can fund projects,” he added.
Moreover, he said that the fund continues to consult with government agencies and the private sector to identify and work on their needs. It also cooperates regularly with the ITFC to participate in financing trade in Egypt.
He highlighted that the fund is currently studying the financing of a private sector hospital in Egypt and that it will soon announce the results of the study after reviewing its financial solvency.
Additionally, he added that the fund contributes with a funding share to the Assiut Power Plant and another share in the South Helwan Power Plant. The fund also approved the financing of six solar plants in 2016 worth $700m, which has not yet been disbursed.
On the Egyptian economic situation, Al-Rajhi said that the Egyptian government’s development plans are always ambitious and that development work in general requires partnerships. This necessitates that the international community mobilise its efforts to meet these demands.
He said, “the latest data on the Egyptian economy indicates that foreign direct flows since December 2010 until now are estimated to be $200bn, and analysts say this is thanks to some steps that were taken, including the liberalisation of the exchange rate.”
“I think those who see the figures will find that Egypt’s economic situation is better than it was in previous years. The reports of international institutions look at this improvement with an optimistic outlook. We also notice an increase in the value of foreign exchange and investments, as well as an improvement in the balance of payments. This contributes to increasing the value of the local currency,” he added.
On the participation of the fund in government the proposals programme to buy shares of the companies offered, Al-Rajhi said that the fund has already participated in the purchase of shares in financial institutions outside Egypt, and if companies within Egypt were found to fit the direction of the fund and need its support, there will be no hesitation to have shares in it, according to El-Rajhi. “As we received requests from offered companies,” he concluded.