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The International Monetary Fund (IMF) has approved a $5 billion augmentation to its loan program for Egypt. This move comes as part of efforts to boost the country’s economy, which has been facing challenges exacerbated by the conflict in Gaza.
The approval from the executive board increases the Extended Fund Facility arrangement from the initially approved $3 billion in December 2022 to $8 billion, Bloomberg reported.
The Washington-based lender announced on Friday that this decision will facilitate an immediate disbursement of $820 million.
According to the IMF Managing Director Kristalina Georgieva, Egypt is facing significant macroeconomic challenges that have become more complex to manage given the spillovers from the recent conflict in Gaza and Israel.”
Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate, clearance of the foreign exchange demand backlog, and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward, and efforts should be sustained going forward.” he stated.
Egypt’s new IMF agreement was announced on March 6, following the implementation of a long-awaited currency flotation, resulting in the pound depreciating by around 40% against the dollar.
The move was facilitated by funding from a $35 billion deal with the United Arab Emirates, the largest inward investment in Egypt’s history.
The nation of over 105 million people has also been hammered by conflicts elsewhere in recent years. Russia’s invasion of Ukraine drove up wheat and oil import prices that drained dollar reserves.
The Gaza crisis has also caused a decline in tourism and reduced shipping through the Suez Canal, a key contributor to foreign currency reserves.
Egypt, already the IMF’s second-biggest borrower after Argentina, anticipates receiving $1.2 billion in extra financing from the lender. With the devaluation and commitments in place, investors attracted by high yields and a more affordable currency have surged into Egypt’s local bonds at an unprecedented rate.
