(Ecofin Agency) - Egypt signed with the World Bank, a $3 billion loan agreement with a 1.2% interest rate and a five-year grace period. The loan is to be paid over 35 years.

According to Mohamed Meid, Egypt’s Deputy Minister of Finance in charge of public treasury, out of the loan secured from World Bank, $1 billion will be used to plug the country’s budget deficit which has been estimated to 9.8% for 2016-2017 while remaining two billion are to be injected in development projects.

Let’s recall that Egypt, in order to plug its $30bn deficit, initiated talks to obtain $21 billion over three years from various institutions. Out of this sum, $12bn comes from the International Monetary Fund (IMF), $3bn from the World Bank and $1.5bn from the African Development Bank (AfDB), in addition to bonds issued on international markets and other sources of financing.

According to Egyptian authorities, the money will be used to support the country’s foreign reserves while contributing to the government’s economic reform program.

Among these reforms, there is limit on salary in public administration and reinforcement of public debt’s management. Moreover, Egypt’s government plans to rationalize subsidies and restructure its energy market. It also aims to facilitate the participation of private sector in economic activities, while improving business environment and boosting competition.