Egypt selects World Bank advisory IFC as strategic IPO consultant

Egypt has announced a five-year partnership with the International Finance Corporation (IFC), a global financial advisory group and member of the World Bank Group.

The IFC – which offers advisory, investments, and loans to developing countries in order to foster economic growth – will act as a strategic advisor to Egypt under the new deal.

The IFC will offer technical assistance to support the government’s privatization program. This includes helping to restructure selected companies that will be part of the initial public offerings (IPOs). The aim is to make these companies more appealing to potential investors.

The agreement was announced by the country’s prime minister in a televised conference on 18 June. Signing off on the contract were IFC managing director Makhtar Diop and Egypt's Minister of International Co-operation Rania Al Mashat.

“The choice of the IFC as the government's strategic consultant for the IPOs allows the use of its accumulated expertise in empowering the private sector in emerging markets,” said Egyptian Prime Minister Mostafa Madbouly.

The partnership is an important step in the Egyptian government’s IPO roadmap, in which it will try to sell off shares of 32 state-owned enterprises. In January, Cairo presented the plan as a move to boost the economy. Investors have shown limited interest, however, because of uncertainty about the exchange rate of the Egyptian pound.

The privatization plan announced in January came very shortly after the International Monetary Fund (IMF) agreed to give Egypt a $3 billion loan to help fix the country’s economy. It is clear that the push to privatize government-owned industries is aimed at meeting the conditions of the IMF, which favors more private sector activity.

Egypt’s economy has been in crisis for years. With high unemployment, rising inflation, a fiscal deficit, a dollar shortage, and a huge shadow economy, the country continues to struggle to find a way forward.

Remittances, money sent from abroad that developing countries often rely on to stimulate local buying and selling, has fallen by 23% in the second half of 2022 in Egypt. The war in Ukraine also badly impacted Egypt, which relied on wheat from Ukraine as well as tourism revenue from both Ukrainian and Russian visitors.

Though the IMF loan could prove to be a lifesaver for Egypt’s troubled economy, experts often criticize the strict conditions and austerity measures that come with such loans, which can exacerbate economic inequality and social hardships in borrowing countries. Additionally, IMF loans can perpetuate a cycle of debt dependency, as countries may become trapped in a pattern of borrowing to repay previous loans, often sinking countries into even worse financial situations.