DUBAI – The International Monetary Fund (IMF) will increase its current loan program with Egypt by $5 billion, the country’s prime minister said on Wednesday, as the central bank allowed the pound to plummet and said it would let the currency trade freely.
The new agreement is an expansion of the $3 billion, 46-month Extended Fund Facility that the IMF struck with Egypt in December 2022, a key plank of which was meant to be a shift to a more flexible exchange rate system.
The program stalled when Egypt reverted to keeping its pound at a tightly managed rate, and amid delays to an ambitious program to divest state assets and boost the role of the private sector.
As part of the new agreement, Egypt will also receive a loan of about $1.2 billion from a separate facility that promotes environmental sustainability, Prime Minister Mostafa Madbouly said.
Wednesday’s deal comes less than two weeks after Egypt announced a deal with the Emirati sovereign wealth fund ADQ that it said would deliver $35 billion in investments by late April.
The IMF agreement signed in 2022 included a structural reforms program to level the playing field between the public and private sector, provisions for monetary policy tightening and fiscal consolidation, and enhanced social safety nets.
Egypt at the time also pledged to trim subsidies and slow down spending on national projects, which have been a focus of an infrastructure splurge under President Abdel Fattah al-Sisi.
Egypt negotiated the program, the latest in a series of support packages from the fund, after the economic fallout from the war in Ukraine prompted investors to pull $20 billion from Egypt within weeks, bringing the country’s financial troubles to the fore.
Since then, spillover from the war in the neighboring Gaza Strip has brought new risks to Egypt’s dollar revenues, including those from shipping in the Suez Canal, which dropped by about a half early this year due to Houthi attacks in the Red Sea.
IMF officials have said additional financing for Egypt’s program is critical for its success following the external shocks, and that Egypt’s stability matters for the whole region. – Reuters