Cairo – Mubasher: Egypt’s Minister of International Cooperation, Rania Al Mashat, has emphasised the role of blended financing in reducing debt distress, given its success in helping Egypt execute major national projects, particularly in the infrastructure sector, and enabling it to achieve positive growth rate at a time when all economies are shrinking.
To reduce debt distress, governors call for the International Monetary Fund (IMF) and the World Bank Group (WBG) to push for greater private sector participation, flexibility in lending policies, and governance reforms to enhance the role and voice of developing countries.
Al Mashat, who also serves as Egypt’s Governor at the WBG, participated in the G24 Ministerial Meeting, as part of the annual World Bank meetings.
The virtual meeting saw the participation of the Governor of the Central Bank of Egypt (CBE) and Governor of Egypt at the IMF, Tarek Amer, Director of the IMF, Kristalina Georgiev, and WBG President, David Malpass.
Blended Financing for Sustainable Recovery
In her speech, the minister talked about the COVID-19 pandemic’s effect on economies in Africa and the Middle East and the growing debt loads because of the economic downturn.
To manage the debt crisis and reconcile the financing needs of developing economies, Al Mashat called for all efforts of international institutions to be streamlined and coordinated in order to help developing countries build a sustainable economic recovery, and for an increase in blended financing.
Blended financing is a combination of public concessional official development assistance (ODA) with private or public resources to support the sustainable development goals, in terms of poverty alleviation, economic development, climate change, and gender equality.
According to the reports of the World Bank and the European Bank for Reconstruction and Development (EBRD), Egypt is likely to achieve growth of 3% and 2% during the current year, and about 2.1% and 5% next year, respectively.
For his part, President of the WBG mentioned the World Bank’s support for developing countries in their emergency response to the COVID-19 pandemic, adding that it deployed a $160 billion loan programme for 100 countries to protect the vulnerable and boost economic recovery.
Managing the Cresting Debt Wave
The pandemic has increased deficit-to-GDP ratios by 5.5 percentage points between 2019 and 2020, and public debt levels by 6.8 percentage points. This means that emerging and developing countries need an estimated $2.5 trillion to meet their developing needs, according to the IMF.
To deal with the worsening debt vulnerabilities, the governors stressed the importance of debt transparency and assisting developing countries to build debt and fiscal management capacity.
During the meeting, governors of the IMF and the World Bank referred to the need to adapt its traditional lending instruments to adequately meet the needs of member countries beyond the years of 2021 and to undertake governance reforms to enhance the role and voice of developing countries.
Established in 1971, the Group of 24 (G-24) aims to help coordinate the positions of developing countries on international monetary and development finance issues.
