The IMF’s Executive Board has agreed to provide Egypt with $3 billion through a 46-month agreement under the Extended Fund Facility (EFF). The decision allows for an immediate disbursement of $347 million to help meet the needs of the balance of payments and support the Egyptian budget. More International Funding Following this agreement with the IMF, Egypt could receive approximately $14 billion in extra financing from its international and regional partners. Egypt’s oil-rich Gulf allies have pledged $20 billion in deposits and investments to support its economy.
Huge funding gap
The International Monetary Fund estimates that Egypt will suffer an external financing gap of up to $16 billion within the 46 months of the current program. especially after Egypt was hit by the shock of rising oil and commodity prices following Russia’s invasion of Ukraine. Egypt has also seen foreign investors withdraw about $22 billion from portfolio investments following interest rate hikes by major central banks.
Severe monetary crisis
In March, Egypt devalued the pound by 16 percent, followed by another 18 percent cut in October, and the pound’s year-to-date decline has reached about 57 percent against the dollar. Egypt’s $400 billion economy is facing its worst foreign exchange crisis since the dollar shortage began five years ago, starting with currency devaluation and Egypt’s previous $12 billion loan from the International Monetary Fund. Fulfilling the fund’s requests The IMF has welcomed the commitment of the Egyptian authorities in recent months to permanently shift to a flexible exchange rate regime and to address distortions caused by previous policies by pre-tightening monetary policy and moving towards strengthening the financial safety net.
Flexible currency system
The IMF believes that a permanent shift to a flexible exchange rate regime will mitigate external shocks, prevent a resurgence of imbalances, and allow monetary policy to focus on gradually reducing inflation. Shifting to such a system of fiscal consolidation will ensure sustainable debt sustainability, while increased social spending will contribute to the protection of vulnerable groups. Structural reforms will also help reduce the country’s footprint, ensure fair competition between the public and private sectors, promote private sector-led growth, and enhance governance and transparency.
To receive notification of the most important news and urgent matters, join our
telegram channel through the link