After two years of negotiations, the International Monetary Fund (IMF) has reached an agreement with Egypt to increase its loan under the Extended Fund Facility (EFF) to $8 billion, up from $3 billion. The first and second reviews under the program are set to be completed soon.
“We are pleased to announce that the Egyptian authorities and the IMF team have reached a staff-level agreement on the economic policies needed to complete the first and second reviews of the EFF arrangement,” said IMF Mission chief to Egypt, Ivanna Vladkova Hollar.
The deal, subject to approval by the IMF Executive Board, includes a comprehensive policy package focusing on preserving Egypt’s debt sustainability, restoring price stability, and reinstating a well-functioning exchange rate system. It also aims to push forward deep structural reforms to promote private sector-led growth and job creation.
The IMF approved the $3 billion loan program in December 2022 in response to the severe repercussions of the Russian-Ukrainian war, which significantly impacted the Egyptian economy. However, no tangible progress has been made since then in meeting the program’s requirements.
The Egyptian economy faces significant macroeconomic challenges, especially with the recent escalation in the Middle East, such as the Israeli war in Gaza.
Flexible exchange regime
The new agreement concentrates on four key objectives to ensure macroeconomic stability and foster private-sector-led growth in Egypt. These objectives include shifting to a flexible exchange rate system, implementing monetary and fiscal policy tightening to reduce inflation and maintain debt sustainability, providing support to vulnerable households, and balancing the roles of the public and private sectors.
Other funds
In addition to the IMF deal, Egypt is seeking further financing from International Financing Institutions and Gulf allies. The World Bank is expected to announce a $3 billion finance package for Egypt, and the European Union plans to provide support soon.
Moreover, Egypt has received $10 billion as part of the Ras El-Hikma development project signed with the UAE in February, marking the largest Foreign Direct Investment (FDI) deal in Egypt’s history.
