The Counterpart Fund | Governing Bodies | Selection of Projects | Monitoring of the projects | List of projects

Origins: the Debt Swap Agreement 

“Debt Swap” is shorthand for a transaction in which a government or organization in a creditor country retires a fraction of a developing country’s external debt, in exchange for a commitment by the debtor government to invest local currency in designated programs.  In essence, the debt swap concept can also be viewed as a form of foreign assistance to a debtor country by its creditors, whether these creditors are commercial institutions or simply credit-granting governments.

Italy and Egypt signed the “Debt-for-Development Swap” agreement in Rome on February 19, 2001 with the aim of converting eligible Official Development Assistance (ODA) bilateral debt owed by the Arab Republic of Egypt to the Italian Republic into financial resources to implement development projects in Egypt. The total amount of debt subject to swap operations under the Agreement is approximately $ 149 million for a period of five years (July 2001 – July 2006).

Egypt is one of a number of middle-income countries that have taken advantage of the growing international awareness for the debt relief of developing nations.  Egypt has negotiated four bilateral Debt Swap agreements, with the governments of France (1994), Switzerland (1995), Germany and Italy (2001).

In Italy, debt swap operations are regulated by law no. 449/ 1997 and law 209/2000. The regulation establishes, among other things, that swaps can be carried out only for the debts of those countries "for which a multilateral understanding has been reached" and, in that sense, among the creditor members of the Paris Club whose juridical/financial effectiveness is obviously bound to the related Applicative Bilateral Agreement of the multilateral Understanding on debt restructuring. The Paris Club in general foresees that, upon the request of the debtor country with which restructuring is being negotiated, pending examination on a voluntary and bilateral case by case basis, swaps can be done on an unlimited amount for assistance loans being restructured by the Club and for not more than 20%-30% of commercial loans (this percentage is lower for so-called "higher middle income countries").

 The Counterpart Fund

According to Art. 2 of the IEDS Agreement, a Counteraprt Fund (CPF) in Egyptian pounds was opened within the Central Bank of Egypt (CBE) and the Egyptian Government deposits into the CPF the equivalent, in Egyptian Pounds, of each installment of the ODA debt (principal and interest) due to the Italian Government at its maturity date, in the period between 9 July 2001 and 8 July 2006.

The Central Bank of Egypt communicates to the Italian institution the amount deposited into the CPF and after relevant verification the debt installment is cancelled. The exchange rate US$/Egyptian Pound is calculated at the due date of each installment.

The mechanism of the transfer of funds into the CPF is directly linked to the process of projects selection since the outstanding amount of the CPF (that is the total amount of the installments transferred into the CPF) should not exceed the total budget of selected projects.

Installments of funds are transferred from the CPF to the projects every six months according to the approved financial plans. They are dependant on the performance of the projects reflected in the progress reports and in the related updated work plan and financial plan.

Governing Bodies

The Management Committee

The Italian Egyptian Debt for Development Swap Program is managed by a bilateral Management Committee (MC) supported by a Technical Support Unit (TSU), acting as a MC secretariat, to monitor and evaluate the results achieved by each project.

The Management Committee includes representatives of both parties: on behalf of the Government of the Italian Republic, the Ambassador of Italy to Egypt assisted by experts in the sector of development cooperation and other specific sectors as the case may be; on behalf of the Government of the Arab Republic of Egypt, the Minister of International Cooperation, assisted by representatives of the Ministry of Foreign Affairs, the Ministry of Finance and the Central Bank of Egypt as well as representatives of other relevant Ministries and/or organizations as the case may be.

The major tasks of the Management Committee are to monitor the correct implementation of the agreement, to select projects to be financed by the funds generated by the debt-for-development swap, to monitor their implementation and verify their achievements.

The MC meetings are held normally three times a year.

The Technical Support Unit

According to art. 4.1 of the Agreement, the Management Committee is responsible for monitoring projects implementation and verifying their achievements. To this end, a Technical Support Unit (TSU) acting as Management Committee Secretariat is appointed under the direct responsibility of the Heads of the Committee. The TSU also provides technical support to the Management Committee for projects selection and for monitoring the implementation of the whole agreement.

The TSU is composed of Italian and Egyptian staff and maintains constant contacts with all the projects financed. The TSU established procedures for drafting the technical and financial progress reports to be submitted by the projects and constantly monitors the progress of each project, both from the technical and financial side, through reports, meeting and field visits.

The TSU also monitors the transfer of funds in and out of the CPF and their utilization in accordance with the plans of the approved projects, also evaluating requests for adjustments to the approved plans in order to adapt to the changing conditions during the life of the project.

Moreover the TSU implements strategies directed at the capacity building of the projects’ staff where needed and, in order to strengthen sustainability and impact, the TSU facilitates also synergies among projects and links with other development initiatives in the country.

Selection of Projects

Funds from the CPF mainly finance projects in the fields of human development, poverty alleviation and environmental protection. The following organizations are entitled to apply to the IEDS for financing

Funds collected in the CPF may also be used to finance local costs of relevant projects and programs undertaken by the Italian Development Cooperation in Egypt.

The Management Committee is responsible for project selection. Project selection is based upon the evaluation of the proposal presented by the applicant, the details of which are listed below. Each applicant must first submit their logical framework, and submit a work plan followed by a resource allocation sheet, and finally a budget.

Upon completion of the project selection process, the budget of each selected project is allocated and disbursed according to the relevant annual financial plan. Within three months before the end of each financial year, the applicant submits to the MC a financial report for the current year and a proposed work plan for the following year and the relevant updated annual financial plan.

 Monitoring of the projects

Financial and technical monitoring is very important for good management of the fund and the sustainability of the projects.  Every six months all projects are required to submit a progress report to the MC.  This specifies achievements, activities, results and expenditure according to the work plan targets. The progress report, which includes technical and financial data, is drafted according to a standard format.

The TSU assist the Projects to draft the progress reports correctly, while at the same time    improving the performance of the staff of the projects on technical and financial management and thus adding to their skills base.

For financial monitoring the TSU has adopted the techniques of “Performance Budget” and “Activity Based Financial Planning” where expenditures are related to activities implemented. Assisting the projects to adopt this vision required full involvement of the TSU in the area of capacity building, institutional empowerment and knowledge transfer to raise and upgrade the skills of the projects' staff.  The philosophy behind this is not only to facilitate the monitoring activities but also to express a strong commitment towards improving national institutions performance through capacity building. Within this wide broader vision the monitoring technique becomes part of the project learning process which eventually results in enhancing the project performance in management and reporting.

When the necessary monitoring is done with an external auditor, this indicates the financial performance of the implementer, and avoids any mismanagement of funds.

 Applicants and Implementing Agencies

The share of the total budget among the projects according to type of applicant is the following:

The share of the total budget according to the type of implementing agency is the following:

The difference between the two distributions is due to the fact that some projects approved to Egyptian institutions or ministries are implemented with the support of UN agencies or NGOs.

Geographic coverage

The projects financed cover almost the entire country: 22 projects are underway in the Delta, 22 in Greater Cairo and Giza, 2 in Sinai, 5 in Siwa, 15 in Fayoum, Minya and Sohag, 13 in Qena and Aswan, 2 in the Red Sea area.

The total budget of the projects approved is shared among the main areas of the country as shown in the following chart.

 Sectors of interventions

Obviously, there is going to be some overlap between the various areas of development and the results of one project may be applicable in more than one sector.  However, a simplistic break down of the total budget according to sector of intervention is shown in the following chart. The large shares for the sectors of Rural development and of Micro-enterprises and SMEs are due to the relative weight of the two biggest projects financed namely IDS/1 “West Nubaria Rural Development Project” and IDS/39 “Relocation of Old Cairo Tanneries”.

 Projects size

The share of the total amount of funds, EGP 835.284.174, among the projects according to their budget size is the following:

v      Micro projects (budget EGP 0-500.000): 5 projects with a total budget of EGP 1,481,440, representing 0.18% of the funds.

v      Small projects (EGP 500,001-2,000,000): 19 projects with a total budget of EGP 32,619,086, representing 3.91% of the funds.

v      Medium projects (EGP 2,000,001-20,000,000): 19 projects with a total budget of EGP 161,606,426, representing 19.35% of the funds.

v      Big projects (EGP 20,000,001-50,000,000): 8 projects with a total budget of EGP 326,927,222, representing 39.14% of the funds.

v      Mega projects (EGP over 50,000,000): 2 projects with a total budget of EGP 312,650,000, representing 37.43% of the funds.

Financial figures

The total amount credited by the Government of Egypt in the Counterpart Fund account on 30/04/06 amounts to EGP 789,244,948 corresponding to the amount of US$ 143,750,811 which represents about 96 % of the total debt which should be converted during  the five years period of conversion of the Agreement (July 2001 – July 2006) amounting to US$ 149,097,996.

At 30/04/06 the total funds transferred from the CPF to the accounts of the projects amount to EGP 543,211,205 representing about 68% of the amount credited until now to the CPF by the Egyptian Government, leaving a balance of EGP 249,822,557. 

The total expenditures reported by the projects at 30/04/06 amount to EGP 378,928,083 representing about the 70% of the related funds transferred to those projects.

Note: the amounts of the interventions, described in Euro, depend on the fluctuation of the exchange rate.

Links to specific projects:

1. Rural development in West Nubariya

2. Poverty Alleviation and Creation of Job Opportunities in the Governorates of Qena, Assyout and Sohag

3. Establishment of Data Base in Rural Areas with the introduction of Family Health Approach

4. Revitalization of Traditional Arts and Crafts and Environment in Old Cairo (El-Fustat)

5. Sustainable rural development in Wady El Rayan and Fayoum New Land

6. Prevention and control of the risk of chemical poisoning and unsafe handling of chemicals

7. Marketing Link Programme – Linking craft producers in marginal communities to national & international markets

8. Multi-faceted Micro-credit Programme

9. Completion of the Pottery Village in Old Cairo (El Foustat)

10. Information and Communication Technologies to foster Egypt’s Sustainable Human Development

11. Support to local agricultural cooperative services provided to settlers of the newly reclaimed lands in Upper Egypt

12. Towards the progressive elimination of child labour

13. School feeding in Upper Egypt

14. Passive in-stream Wetland treatment of drain water: a demonstration project

15. Environmental Impact Assessment for drinking water (hand pump) in rural areas in Egypt

16. Egyptian Database of special needs service

17. Free village Model: a village free from the phenomenon of Female Genital Mutilations (FGM)

18. National Campaign for Drug Abuse and Demand Reduction

19. School Construction and Furnishing in Sharkia, Minia and Sohag

20. Social Marketing and Communication Campaign for Empowering Young People in Egypt “Think Twice”

21. Expansion of the Health School Programme

22. Program of support to the Egyptian Environmental Affairs Agency – Phase II

23. National Bio-Diversity and Natural Heritage Inventory and Monitoring Systems

24. Evaluation, Development and Execution of some Flash Food Protection Works in the Southern Valley, Sinai

25. Management of Water Resources for Sustainable Agricultural Development in the Area of Toshka

26. Pilot project on Leprosy Elimination Programme

27. Participatory Slum Upgrading in El Hallous and El Bahtini

28. Extension of the Medical Research institute, University of Alexandria – Phase II

29. Support to the youth of the leprosy communities (Leprosy Village)

30. Assessment of Water Users Associations in Egypt

31. Strategic long-term water-based Food Security model for Egypt

32. Integration of the traditional workers in the new systems of waste collecting

33. HIV / AIDS prevention & control in Egypt

34. Brackish Water Desalination for Urbanization of remote arid areas in Egypt

35. Improving health conditions of child workers in two Governorates

36. Rural Development Communication Network

37. Traceability of agro-industrial products to the European market

38. Away from the Street

39. Relocation of tanneries from the area of Old Cairo

40. Program of economic and social development for female heads of household

41. Environmental Awareness Campaign

42. Support to water services in the governorate of Beheira

43. Yashback Palace restoration training

44. Literacy and vocational training for children in Sohag

45. Women Entrepreneurship in Giza

46. Improving quality of life of children and families

47. Enhancement of NGOs kindergartens services

48. Improving Education in the Oasis of Siwa

49. Creation of Sustainable Job Opportunities to Alleviate Poverty and Unemployment in Minia

50. Improving living conditions for children with special needs

51. Infrastructural support to External Employment Department

52. Dolphins habitat conservation and sustainable use in Marsa ALam

53. Pilot Project for Green Corridor

E-mail: debtswap.cairo@esteri.it