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Cablegate: Italy and Egypt Renew Debt Swap Agreement

VZCZCXYZ0002
PP RUEHWEB

DE RUEHEG #1831 1651432
ZNR UUUUU ZZH
P 141432Z JUN 07
FM AMEMBASSY CAIRO
TO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5686
INFO RUEHRO/AMEMBASSY ROME PRIORITY 1491

UNCLAS CAIRO 001831

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON POL AID EG
SUBJECT: ITALY AND EGYPT RENEW DEBT SWAP AGREEMENT

1. On June 3, 2007, Egypt and Italy renewed their "Debt for
Development Swap" agreement which converts bilateral debt
owed to Italy into Egyptian pounds to be used for development
projects. The program, inaugurated in 2001, cancels Official
Development Assistance (ODA) bilateral debt in exchange for
equivelent GOE deposits into a fund at the Egyptian Central
Bank. The 2001 Agreement between Italy and Egypt was signed
for approximately $149 million over a five-year period, and
the 2007 agreement was signed for a further $100 million over
a second five-year period. Treasury Attache spoke with
Italian econoff who noted that 80 percent of the funds from
the 2001 swap have been used, and he estimates that the rest
of the fund will be spent by the end of 2007. The Italian
econoff also stated that despite the relatively small amount
of the swap, the "principal and symbolism" of the agreement
are equally important.

2. The Italian Debt for Development Swap program is
administered by the GOE's Ministry for International
Cooperation and is overseen by a Management Committee (MC).
Italy's Ambassador and Minister for International
Cooperation, Faiza Aboul Naga, sit on the MC, and a Technical
Support Unit provides subject-matter expertise, monitoring,
and evaluation of the development projects. The MC meets
several times a year and ensures that development programming
is effectively administered and implemented. Projects funded
under the agreement focus on a variety of development
projects, including: human development, poverty alleviation,
and environmental improvement.

3. Paris Club rules allow swaps of ODA. Creditors are
required to inform other members of any swaps. The USG
currently does not have the required legislative authority or
appropriations to conduct a debt swap with Egypt. GOE debt
to the USG is approximately $4 billion, owed to USAID and
USDA.
JONES

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