IMF approves increasing loan program for Egypt to $8 billion

The International Monetary Fund (IMF) has approved increasing the loan program, initially of $3 billion, that it signed with Egypt in December 2022 to $8 billion, the financial organization announced tonight in a statement.

“The IMF Board today completed the first and second reviews of the expanded arrangement under the Expanded Fund Facility (EFS) for Egypt and approved an increase to the original program by approximately $5 billion, which will allow the authorities to withdraw the equivalent of about 820 million dollars“, he reported in the note.

The IMF originally approved the loan program for Egypt in December 2022 that would develop during 46 months for an amount of 3,000 million dollars which is now expanded to 8,000 million dollars after making effective the preliminary agreement agreed upon the first week of March with the Egyptian authorities.

The financial organization evaluated that “all but one of the objectives were met of quantitative performance by the end of June 2023″, and also “approved the authorities’ request for a waiver for non-compliance with the June performance criterion on Net International Reserves on the basis of corrective actions.”

“Macroeconomic conditions since the approval of the program have been difficultwith rising inflation, a shortage of foreign currency and high levels of debt and financing needs,” assessed the IMF, which took into account the effects of Russia’s war in Ukraine, which were “subsequently aggravated by the conflict in Gaza and Israel, as well as the tensions in the Red Sea.”

In this context, “external shocks and delays in policy adjustment affected economic activity,” whose “growth slowed to 3.8% in the 2022/23 fiscal year due to weak confidence and a shortage of foreign currency.

The IMF projected the slowdown will be 3% in fiscal year 2023/24 before recovering to around 4.5% in the following fiscal year and forecast a decrease in inflation“which remains high”, in the medium term as the tightening of policies is consolidated.

On the other hand, the financial entity, based in Washington, affirmed that the investment agreement of 35,000 million dollars between the United Arab Emirates and Egypt build a city in Ras al Hikmaon the Egyptian Mediterranean coast, “relieved short-term balance of payments pressures” and “will help Egypt rebuild reserves to face future shocks.”

Despite this, he emphasized the need to implement economic policies and structural reforms “to allow the private sector to become the engine of growth.”

“With policies to restore macroeconomic stability, the stage is set to accelerate the implementation of the structural reform agenda aimed at achieving inclusive and sustainable growth. Withdraw the State and the army from economic activity and leveling the playing field between the public and private sectors is key to attracting domestic and foreign private investment to Egypt,” said IMF Managing Director Kristalina Georgieva.

This extension of the loan comes when Egypt is pending to pay at the end of this fiscal year, in June, some $42 billion in debt maturity.