Agricultural production credit project

Implementing agencies will be the Principal Bank for Development and Agricultural Credit (PBDAC) and the Ministry of Agriculture and Food Security (MOA). To support increased capitalization of PBDAC of LE 135 million over the life of the project, A.I.D. will provide $100 million in performance payments to the Government of Egypt (GOE), in incremental disbursements contingent in part on increases in PBDAC capitalization and in part on GOE institution of policy reforms that will increase the demand for credit. Interest earned on loans will be retained by PBDAC and added to the capital fund annually. Also, the GOE will begin a program for sufficient PBDAC retention of earnings to assure adequate long-term capitalization. Increased capitalization will enable PBDAC to borrow additional funds from commercial banks (with help from the Private Enterprise Credit Project), and so meet the increased demand for credit. USAID/E will monitor PBDAC lending to ensure that it maintains the highest legal interest rate and that funds are reaching target groups. To reorient PBDAC services to small farmers, TA will be provided to upgrade financial management at PBDAC headquarters in Cairo, in its district offices in all 17 Egyptian governorates, and in 350 village banks in 11 governorates. Computerized management information systems will be installed in PBDAC"s district offices, and the manual systems in village banks will be upgraded. The project will also train village-level outreach teams of bank managers, financial analysts, and extension agents to advise farmers on farm budgets, investments, and technology. Training will be short-term and, except for some overseas training (mainly of middle managers), in-country. GOE policy reforms -- liberalizing crop and import prices, relaxing crop production controls, withdrawing input subsidies, and eliminating public sector input distribution monopolies -- will foster the growth of private sector input distribution and service firms. TA will help the PBDAC phase down subsidized input distribution and focus its attention of providing credit and TA to these private firms. Amendment of 8/10/93 increases funding by $26 million to $309 million to support an expanded program of agricultural reforms. Of this, $25 million will be provided to the GOE as a performance payment in support of reforms to: liberalize cotton production and marketing; strengthen PBDAC"s financial viability; eliminate bans on the import of red meat, poultry, and agricultural machinery; eliminate controls on cropping patterns; and possibly, other measures, including elimination of remaining subsidies on agricultural inputs, privatization of PBDAC, liberalization of the seed market, and elimination of controls on sugarcane. The remaining $1 million will support policy reform monitoring, verification, and impact studies -- including studies related to design of the reform agenda for the follow-on Agricultural Policy Reform Program (APRP). (PD-ABG-907)