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Wednesday, 24 November 2021

CBE announces multi-bn EGP lending program to modernize irrigation systems

The Central Bank of Egypt will help fund the government’s push to reduce the amount of water used by Egyptian agriculture, announcing (pdf) yesterday a multi-bn EGP program to help farmers switch to modern, more water-efficient irrigation methods. The central bank will channel EGP 55.5 bn to farmers and agribusinesses to purchase new equipment and install new irrigation systems, which will be deployed as soft loans through state-owned institutions National Bank of Egypt (NBE) and the Agricultural Bank of Egypt (ABE).

No strings: Borrowers will repay the sum over a 10-year period with zero interest, the bank said, with their first payment due one year from the date they complete the installation of the infrastructure.

This isn’t the central bank’s first gig financing irrigation policy: This initiative replaces a similar CBE program that provided finance to farmers at a 5% rate of interest.

Ambitious targets: The initiative aims to equip about 4 mn feddans of agricultural land with modern irrigation systems within three years, the CBE said.

The push for modern irrigation has been ongoing for years now: The government had announced a USD 50 bn water saving plan in 2019 focusing on promoting modern irrigation methods and the cultivation of non-water intensive crops, with the aim to overcome water scarcity by encouraging the use of modern irrigation methods, cultivation of fewer water-intensive crops and establishment of desalination plants. And back in May the Cabinet agreed to a set of measures as part of the government’s shift towards modern irrigation systems, as well as setting up a specialized committee to oversee the project.

Reuse is also a priority: The government is studying proposals to reuse 3 bn cbm of agricultural drainage water each year, which could help save about 2 bn cubic meters of water annually, the cabinet said yesterday.

Critical background: We think water leakage in agriculture could be Egypt’s most pressing water infrastructure problem.

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