The executive board of the International Monetary Fund (IMF) has approved a USD 3 billion loan to Egypt to be repaid over 46 months.
According to an IMF statement, the decision permits an immediate disbursement of approximately USD 347 million to Egypt, which will aid in maintaining the country’s balance of payments and supporting its budget. The loan package is also expected to encourage Egypt’s international and regional partners to contribute an additional USD 14 billion to finance the most populous country in the Arab world.
The IMF claims that the financial assistance was given in exchange for the Egyptian government implementing an economic reform plan in an effort to create “sustainable, inclusive, and private-sector-led growth.”
Along with other measures, the US-based financial organization beseeched Egypt to “permanently shift to a flexible exchange rate regime,” continue a “downward trajectory in public-debt-to-GDP”, scale back “the state footprint,” and “facilitate private-sector-led growth”.
Due to capital flight from emerging markets brought on by the Russia-Ukraine crisis, Egypt is currently experiencing high inflation and a foreign currency shortage, hence the approval of the IMF loan.
Official data show that Egypt’s annual urban consumer inflation rate climbed from 16.2% in October to 18.7% in November, which is the largest increase since it reached 21.9 percent in December 2017.
The IMF loan approval, in the opinion of some Egyptian economists, is a “certificate of confidence” in the Egyptian economy.
According to a professor of economics in Egypt and the chairman of the parliamentary planning and budget committee, Fakhri al-Fiqi, the international business community has been waiting for this certificate of confidence.
He explained that the IMF’s assistance package, combined with an extra USD 14 billion from other partners, will make up for the outflow of hot money and the scarcity of foreign currency, ultimately limiting inflation.
“Inflation is expected to gradually slow down over the next four years to 4-5 per cent, which will make it affordable to average Egyptian citizens”.
Author-Roberta Appiah
