IMF approves $820 million in economic bailouts for Egypt
Comment
The Egyptian government will receive an immediate $820 million payment from the International Monetary Fund on Friday as part of an expanded plan to support the country’s faltering economy.
The payment was approved by the IMF Executive Board as a component of a $3 billion aid package that was awarded at the end of 2022.
The Egyptian government has been waiting impatiently for the IMF action, which comes at a time when the country’s economic problems are getting worse.
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The Fund has now loaned $8 billion to Egypt overall after the Board approved a $5 billion extension that was announced at the beginning of the month.
Except for the amount of its foreign currency reserves, the Egyptian government has met every goal outlined in the first two phases of the aid program, according to an IMF press release provided to AFP on Friday.
“The authorities have significantly strengthened the reform package,” IMF Managing Director Kristalina Georgieva said in the release.
“Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate… and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward,” she added.
The Egyptian pound fell 40 percent in a single day after falling 50 percent over the previous few months when Egypt’s central bank hiked interest rates earlier this month by six percentage points to 27.75 percent to fight inflation and bring the official exchange rate closer to the black market rate.
Two-thirds of Egypt’s 106 million people live at or near the poverty line, and the nation is experiencing a decline in foreign exchange earnings due to issues with the Suez Canal or tourism, which the pandemic has negatively impacted, the war in Ukraine, and the ongoing conflict in the Gaza Strip.
The IMF reported that since the beginning of the year, attacks by Yemen’s Huthi rebels in the Red Sea and the Gulf of Aden have cut dollar revenues from the canal—a vital route for international trade—by 40–50 percent.
President Abdel Fattah al-Sisi has undertaken several massive projects since assuming office in 2013, which economists say have not increased revenue but have significantly strained the state’s financial resources.
According to World Bank data, Egypt’s foreign debt increased from $46 billion to over $165 billion between 2013 and 2022, placing it second most vulnerable to default after war-torn Ukraine.
The IMF, however, is predicting 4.4 percent economic growth in the upcoming fiscal year, up from 3 percent in the current fiscal year that ends on June 30. This is a fairly optimistic outlook.
