The European Investment Bank (EIB), the financing institution of the European Union (EU), is granting a loan of EUR 50 million(1) to the Government of the Arab Republic of Egypt for part financing a new drainage programme in the Nile Valley and Delta regions. The loan is made available under the second Euro-Mediterranean Partnership mandate and, given the project's environmental orientation, will benefit from an interest subsidy financed from the Community Budget.

The project includes the provision of new sub-surface drainage and rehabilitation of old drainage systems for a total of 330 000 ha of agricultural area, as well as the deepening and remodelling of open conveyance drains serving some 150 000 ha of irrigated lands. The promoter is the Egyptian Public Authority for Drainage Projects (EPADP), an organisation responsible -under the Ministry of Water Resources and Irrigation- for implementing, maintaining and operating surface and sub-surface agricultural drainage systems in Egypt.

The project is essentially driven by environmental objectives. It aims at protecting and enhancing the environment of the cultivated area of the Nile Valley and Delta, and rationalise the use of scarce water resources for agricultural purposes. Good water and land-use management is key to sustainable rural development in Egypt, safeguarding the well-being of the large rural population by protecting scarce arable land and water resources. The project will help modernise agriculture, improving crop yields and therefore farmers' income.

This operation involves a coordinated European and multilateral donor preparation and financing, with the Egyptian Government Budget contribution being complemented by long-term loans from the EIB, the World Bank and the German Government (through KfW), while the Dutch Government will be providing technical assistance.

The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries. In the Mediterranean region, the EIB operates under the new Euro-Mediterranean Partnership, which complements the EU Member States' own bilateral co-operation policies. The Bank has been entrusted with a second mandate, this time to provide up to EUR 6 425 million over the period 2000 - 2006 for financing projects in the 12 southern-rim Mediterranean countries which have signed cooperation or association agreements with the EU.

Total EIB financing since 1978 in Egypt amounts to some EUR 1.5 billion. Particular emphasis is being given to supporting industrial development, through financing large scale industrial schemes, as well as global loans to the Egyptian banking sector for on-lending to small and medium sized enterprises investing in medium to long term productive projects. Economic and public infrastructures have largely benefited from EIB funding.

(1) Conversion rates: EUR 1 = 0.666300 GBP, 4.01325 EGP, 1.16675 USD