IMF, Egypt finalize $1.2 Billion loan agreement
As part of a $8 billion loan deal, Egypt and the International Monetary Fund (IMF) have agreed a staff-level agreement to release $1.2 billion under the Extended Fund Facility. The IMF’s Executive Board still has to authorize the arrangement, which was unveiled on Tuesday.
This agreement comes after talks to evaluate Egypt’s economic stabilization reform implementation progress. Increasing domestic income, strengthening the business environment, speeding up privatization, and promoting governance and transparency are among the top objectives, as IMF sees these measures integral to addressing Egypt’s economic challenges and ensuring fiscal stability.
Egypt has pledged to accelerate the sale of public assets and increase its tax-to-GDP ratio by 2% over a two-year period. Building on the recent sale of a 30% share in United Bank, the government intends to make at least ten state-owned companies available to investors or via public listings in 2024. These initiatives seek to increase private sector participation and draw in foreign investment.
Egypt’s approach continues to revolve on budgetary reforms and currency devaluation. This year, the value of the Egyptian pound has dropped by over 40% in relation to the US dollar, reaching a record low of 51 to the dollar, according to Bloomberg.
In an effort to reduce spending, the government has raised the price of gasoline three times, raised the cost of electricity, and subsidized bread. However, officials warn against further drastic measures, since they would put too much strain on the country’s 107 million population, Bloomberg reports.
Under Egypt’s 46-month program, which was started in December 2022, this agreement represents the fourth review. Egypt and the IMF emphasized the need of creating a more competitive business climate.
Building trust in the private sector and releasing Egypt’s economic potential require lowering the government’s economic footprint and leveling the playing field, noted Ivanna Vladkova Hollar, who led the IMF’s talks with Egyptian officials .
