The International Monetary Fund approved a loan of 3 billion dollars to Egypt
The Executive Board of the International Monetary Fund approved a 46-month agreement with Egypt under the “Extended Fund Facility” in the amount of 2,350.17 million SDRs (which is equivalent to 115.4 percent of the membership quota in the Fund, or about 3 billion dollars).
Immediate disbursement of the IMF loan to Egypt in the amount of 347 million dollars
The Executive Board’s decision authorizes the immediate disbursement of SDR 261.13 million (equivalent to USD 347 million) to help meet balance of payments and budget support needs. and throughout the entire program.
The Extended Fund Facility is expected to trigger the availability of approximately $14 billion in additional financing for Egypt from its international and regional partners, including new sources of financing from the GCC states and other partners through the ongoing sale of state-owned assets and traditional financing channels from bilateral creditors. .and multilateral.
The government’s economic program supported by the agreement on the “Extended Fund Facility” aims to implement a comprehensive package of policies aimed at maintaining macroeconomic stability, restoring protective reserves and paving the way towards achieving sustainable and inclusive growth led by the private sector.
Specifically, the policy package includes:
(1) Permanent transition to a flexible exchange rate system in order to increase resistance to external shocks and rebuild external protective reserves,
(2) Implementation of monetary policy aimed at gradually reducing the inflation rate in accordance with the goals of the Central Bank, while strengthening the mechanism of transmission of the effects of monetary policy, including the abolition of subsidizing credit programs.
(3) Financial control and debt management in order to ensure a decrease in the share of public debt in GDP and curb the overall need for financing, while increasing social spending and strengthening the social safety net to protect vulnerable groups, and managing national investment projects in a way that the sustainability of the external central bank and economic stability are achieved.
(4) Large-scale structural reforms to reduce state influence, ensure fair competition among all economic entities, facilitate private sector-led growth, and improve governance and transparency in the public sector.
The authorities have also requested access to the Resilience and Sustainability Instrument, which could provide additional financing of up to SDR 1 billion to support climate policy goals. This request is expected to be discussed during the upcoming reviews under the Extended Financing Facility.
After the discussion of the Executive Committee, Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund and President of the Committee, made the following statement:
“Egypt responded decisively to the crisis caused by COVID-19 thanks to previous programs supported by the IMF. Despite accelerating economic recovery during 2021, imbalances have started to accumulate as a result of exchange rate stability, high levels of public debt and the delayed pace of structural reforms. The war in Ukraine contributed to the crystallisation of existing vulnerabilities. It caused an outflow of capital and, in the light of continued exchange rate fixation, led to a decrease in the central bank’s foreign exchange reserves, a decrease in the banks’ net foreign assets and a worsening of exchange rate imbalances.
“A comprehensive package of macroeconomic and structural policies is needed to reduce these imbalances, maintain macroeconomic stability, restore buffers, increase resilience to shocks and pave the way for private sector-led growth.” In this context, we welcome the authorities’ recent commitment to a permanent transition to a flexible exchange rate regime, to address distortions arising from previous policies through previous monetary policy tightening, and to move towards strengthening the financial safety net.
“The government’s economic programme, supported by a 46-month extended funding agreement, includes a package of credible policies aimed at addressing these challenges in the medium term. A permanent transition to a flexible exchange rate system will mitigate external shocks and prevent the recurrence of imbalances, and will also allow monetary policy to focus on a gradual reduction in inflation. Fiscal consolidation will ensure debt sustainability, while increasing social spending will protect the vulnerable. Structural reforms will also help reduce state influence, ensure fair competition between the public and private sectors, promote private sector-led growth, and improve governance and transparency. The “Extended Financing Facility” would bridge part of the financing gap and encourage the availability of more financing in the form of investments for Egypt from its international and regional partners to bridge the remaining gap.
“In light of the growing uncertainty and risks surrounding the global economic outlook, the authorities’ commitment to continue implementing a flexible exchange rate regime, macroprudential policies and structural reforms is a crucial step. Good government performance, a strong sense of ownership of programs previously supported by the Fund and political support for the policy package are important factors that will mitigate risks and achieve the goals of the current program supported by the Fund.”