The IMF has approved $820n in bailouts for the Egyptian economy

The International Monetary Fund on Friday announced an immediate $820 million loan to the Egyptian government, part of an expanded program to help the country's struggling economy.

The IMF's executive board verified the payment as part of a $3 billion aid package due by the end of 2022.

The IMF action, which has been repeatedly postponed and eagerly awaited by the Egyptian government, comes at a time of mounting difficulties for its economy.

The board also approved a $5 billion extension announced earlier this month, bringing the fund's total lending to Egypt to $8 billion.

In a press release sent to AFP on Friday, the IMF said the Egyptian government had achieved all the objectives set out in the first two phases of the assistance program, except for the level of its foreign currency reserves.

„The authorities have significantly strengthened the reform package,” IMF Managing Director Kristalina Georgieva said in the release.

„Recent measures to correct macroeconomic imbalances, peg the exchange rate… and significantly tighten monetary and fiscal policies are difficult but important steps,” he added.

Earlier this month, Egypt's central bank raised rates six percent to 27.75 percent to combat inflation and brought the official exchange rate closer to the black market rate, causing the Egyptian pound to plunge 40 percent in a single day following a 50 percent plunge. For the past few months.

Nearly two-thirds of Egypt's 106 million people live below or above the poverty line, and the country faces a drop in foreign currency earnings, albeit in tourism — hit by the pandemic, then the war in Ukraine and now the war. Troubles in the Gaza Strip – or the Suez Canal.

Attacks by Yemen's Houthi rebels in the Red Sea and Gulf of Aden have cut dollar flows from the canal, a critical route for world trade, by 40-50 percent since the start of the year, according to the IMF.

Since coming to power in 2013, President Abdel Fattah al-Sisi has launched a series of mega-projects that economists believe have not generated new revenue but severely limited the state's fiscal capacity.

Between 2013 and 2022, Egypt's external debt is expected to rise from $46 billion to $165 billion, according to World Bank data, making it the second country at risk of default behind war-torn Ukraine.

However, the IMF is more optimistic about the coming fiscal year, forecasting economic growth to rise 4.4 percent, compared to 3 percent in the current fiscal year ending June 30.

AFP