IMF confirms increasing Egypt's bailout loan to $8B

IMF confirms increasing Egypt’s bailout loan to $8B

/ 03:50 PM April 01, 2024

CAIRO — The executive board of the International Monetary Fund confirmed a deal with Egypt to increase its bailout loan from $3 billion to $8 billion, in a move that is meant to shore up the Arab country’s economy which is hit by a staggering shortage of foreign currency and soaring inflation.

In a statement late Friday, the board said its decision would enable Egypt to immediately receive about $820 million as part of the deal which was announced earlier this month.

The deal was achieved after Egypt agreed with the IMF on a reform plan that is centered on floating the local currency, reducing public investment and allowing the private sector to become the engine of growth, the statement said.

Article continues after this advertisement

Egypt has already floated the pound and sharply increased the main interest rate. Commercial banks are now trading the U.S. currency at more than 47 pounds, up from about 31 pounds. The measures are meant to combat ballooning inflation and attract foreign investment.

FEATURED STORIES

READ: Egypt central bank chief quits amid deepening crisis

The Egyptian economy has been hit hard by years of government austerity, the coronavirus pandemic, the fallout from Russia’s full-scale invasion of Ukraine, and most recently, the Israel-Hamas war in Gaza. The Houthi attacks on shipping routes in the Red Sea have slashed Suez Canal revenues, which is a major source for foreign currency. The attacks forced traffic away from the canal and around the tip of Africa.

Article continues after this advertisement

“Egypt is facing significant macroeconomic challenges that have become more complex to manage given the spillovers from the recent conflict in Gaza and Israel. The disruptions in the Red Sea are also reducing Suez Canal receipts, which are an important source of foreign exchange inflows and fiscal revenue,” said IMF’s Managing Director Kristalina Georgieva.

Article continues after this advertisement

External shocks

The IMF said such external shocks, combined with delayed reforms, have negatively impacted economic activity. Growth slowed to 3.8% in the fiscal year 2022-23 due to weak confidence and foreign currency shortages, and is projected to slow further to 3% in the fiscal year 2023-24 before recovering to about 4½ percent in 2024-25, the IMF statement said.

Article continues after this advertisement

READ: Cash-strapped Egypt sells state assets to Gulf nations

The annual inflation rate was 36 percent in February, but is expected to ease over the medium term, the IMF said.

Article continues after this advertisement

The currency devaluation and interest rate hike have inflicted further pain on Egyptians already struggling with skyrocketing prices over the past years. Nearly 30 percent of Egyptians live in poverty, according to official figures.

Finance Minister Mohamed Maait said the confirmation by the IMF’s executive board “reflects the importance of the correcting measures” taken by the government.

Egypt also this month signed a deal with the European Union that includes a 7.4 billion-euro ($8 billion) aid package for the most populous Arab country over three years.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

To quickly inject much-needed funds into Egypt’s staggering economy, the EU intends to fast-track 1 billion euros ($1.1 billion) of the package, using an urgent funding procedure that bypasses parliamentary oversight and other safeguards, according to European Commission President Ursula von der Leyen.

TAGS: Egypt, IMF, loan

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter!

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

This is an information message

We use cookies to enhance your experience. By continuing, you agree to our use of cookies. Learn more here.