NWFE: Major International Partnerships for Climate-Focused Debt Swap

The first follow-up progress report of the NWFE program was issued by the Ministry of International Cooperation on the occasion of the one-year anniversary of the launch of the program.

The NWFE program -the nexus between water, food, and energy projects- featured the start of implementation of a debt swap agreement between Egypt and Germany worth €104 million in light of the efforts made with partners at the local and international levels to mobilize innovative financing tools to implement the pledges of the program.

The report stated that, according to the political declaration issued in partnership between the Arab Republic of Egypt, the United States of America, and the Federal Republic of Germany, during COP27, it stipulated Egypt’s commitment to updating the Nationally Determined Contributions (NDCs) and early reaching the percentage of renewable energy to 42% of total energy, to 2030 instead of 2035. These contributions have already been updated in the middle of this year.

The report continued: “Accordingly, the Ministry of International Cooperation intensified coordination efforts with national entities and the German side, and a debt swap agreement for climate action was signed with the German side worth €54 million to support enhancing investments in the electricity transmission network and linking two wind energy projects with a capacity of 500 megawatts-The wind farm in Neuss, and the Amunet wind farm in the Red Sea- on the national transmission network, and work is currently underway to sign the second tranche of a debt swap with Germany for the program worth €50 million.”

The report stressed the importance of the debt swap mechanism as one of the innovative financing tools to enhance climate action, which international financial institutions are currently calling for as one of the support mechanisms for developing countries and emerging economies to achieve their climate ambitions.

The report explained that the joint political declaration stipulated the mobilization of concessional financing and a debt swap for the energy pillar worth $500 million, and coordination is being made with other development partners in this framework.

The report noted that in this context, cooperation is ongoing with the United States of America to provide a $35 million grant, of which $25 million will be provided through the US State Department to the European Bank for Reconstruction and Development (EBRD).

The energy pillar aims to shut down 12 thermal power plants with a capacity of 5 GWs, and stimulate investments worth $10 billion to launch renewable energy projects with a capacity of 10 GWs during the period from 2023 to 2028, in close partnership with the local and foreign private sector.

During COP27, the partnership agreement on the energy pillar was signed with the EBRD, the European Investment Bank (EIB), the French Development Agency (AFD), the African Development Bank (AfDB), the Asian Infrastructure Investment Bank (AIIB), the United Kingdom, Denmark, and the Netherlands.

The Ministry of International Cooperation explained, in its statement, that the energy pillar projects enhance the achievement of the goals of Egypt’s Climate Change Strategy to reach sustainable economic growth, implement NDCs, and reduce approximately 17 million tons of carbon dioxide emissions annually that results from the closure of stations that operate using thermal energy and replacing it with renewable energy plants, saving $1.2 billion annually that was originally spent on providing the fuel necessary to operate these plants.