The International Monetary Fund (IMF) has said that its executive board had approved a loan to Egypt of about $3 billion over 46 months.
The decision enables an immediate disbursement of about $347 million to Egypt, “which will help meet the balance of payments need and provide support to the budget”, the IMF said in a statement, adding the loan package is expected to encourage Egypt’s international and regional partners to provide an extra 14 billion dollars to finance the most populous Arab country, Xinhua news agency reported.
According to the IMF, the financial support was granted in exchange for an economic reform program from the Egyptian government, which it hopes can pave the way for “sustainable, inclusive and private-sector-led growth”.
The US-based finance institution has also asked Egypt to make “a permanent shift to a flexible exchange rate regime,” ensure the “downward trajectory in public-debt-to-GDP”, reduce “the state footprint”, “facilitate private-sector-led growth” and more.
The IMF’s loan comes at a time when Egypt is suffering high inflation and foreign currency shortage after the Russia-Ukraine crisis prompted capital flight from emerging markets.
Egypt’s annual urban consumer inflation rate rose from 16.2 per cent in October to 18.7 per cent in November, marking the highest increase since December 2017 when it reached 21.9 per cent, according to official data.
Some Egyptian economists considered the approved IMF loan “a certificate of confidence” in the Egyptian economy.
“The international business community has been waiting for this certificate of confidence, as the IMF will be evaluating and reviewing Egypt’s economic and structural reform program biannually for the coming four years,” Fakhri al-Fiqi, an Egyptian economic professor and head of the parliamentary planning and budget committee, told the news agency.
Al-Fiqi explained that the IMF support package, along with the anticipated additional $14 billion from other partners, will make up for the hot money withdrawal and the foreign currency shortage and eventually contain inflation.
“The inflation is expected to gradually slow down over the coming four years to 4-5 per cent as it used to be, in which case it will be affordable to average Egyptian citizens,” the expert told the news agency.
Egypt carried out a three-year economic reform program that started in late 2016 with the support of a $12-billion loan from the IMF.
