EU releases another $1.06B to Egypt to boost fragile economy

The European Union’s latest package of support for the North African country’s economic recovery follows an $8 billion deal announced March 17.

The European Union has mobilized another €1 billion ($1.06 billion) in aid to Egypt, to help the country’s struggling economy recover.

This latest tranche is part of a larger €5 billion ($5.31 billion) loan package, the European Commission said Friday in a statement. The remaining €4 billion is scheduled for 2024–27, pending adoption by the 27 EU member states.

“The aid is meant to address the deteriorating macro-fiscal situation and financing needs of the country over the recent months, notably after the outbreak of the Gaza war, the Houthi attacks in the Red Sea and the repercussions of Russia’s war of aggression against Ukraine,” the European Commission said.

The commission also stated that the financial assistance will be provided in the form of loans made available in one installment.

“A precondition for granting the assistance is that Egypt continues to make concrete and credible steps towards respecting effective democratic mechanisms (including a multi-party parliamentary system) and the rule of law and guaranteeing respect for human rights,” the commission added.

Background: European Commission President Ursula von der Leyen arrived on March 17 in Cairo, accompanied by leaders of Austria, Belgium, Cyprus, Greece and Italy. At a signing ceremony with Egyptian President Abdel Fattah al-Sisi, the European Union representatives pledged a package of €7.4 billion ($8 billion) for cash-strapped Egypt. Those funds will be disbursed over three years and go toward economic and trade relations, energy and immigration.

The International Monetary Fund on March 6 revamped its support program up to €7.4 billion ($8 billion), which will be made available if the Egyptian government meets certain conditions.

The IMF guarantee also follows a move by the UAE in February to invest $35 billion in Egypt under a deal that includes rights for the Gulf country to develop Ras el-Hekma, a resort on Egypt’s Mediterranean coast.

Why it matters: Egypt is experiencing its worst economic crisis in more than half a century, stemming from the COVID-19 pandemic, which began in 2020, and the Russian invasion of Ukraine in February 2022.

North Africa’s most populous country, Egypt was heavily reliant on imports from the Black Sea region, among them fertilizer and wheat. Shortages and price hikes due to the war In Ukraine caused runaway inflation. Egypt’s population of 111 million also confronted a dire shortage of foreign currency, leading many Egyptians to turn to the black market for better dollar exchange rates than the banks are providing.