Egypt signs $8 billion loan deal with IMF

Country implements biggest-ever interest-rate hike and allows its currency to weaken more than 38%

Egypt has signed a staff-level deal with the International Monetary Fund (IMF) to secure an Extended Fund Facility (EFF) of $8 billion to overcome macroeconomic challenges its economy is facing.

on Wednesday, the Central Bank of Egypt (CBE) implemented an exchange rate flexibility, allowing the value of the Egyptian pound to be regulated by market forces as an attempt to alleviate an already ailing economy.

“Amid significant macroeconomic challenges that have become more complex to manage with the impact of the recent conflict in Gaza on tourism and Suez Canal receipts, staff also considered the authorities’ request for an augmentation of IMF support to Egypt from SDR 2.35 billion (equivalent to about US$ 3 billion) to SDR 6.11 (equivalent to about US$ 8 billion),” said an IMF statement

However, this agreement is subject to approval by the IMF Executive Board.

The comprehensive policy package seeks to preserve debt sustainability, restore price stability, and reinstate a well-functioning exchange rate system while continuing to push forward deep structural reforms to promote private sector-led growth and job creation, the statement added.

The Egyptian authorities are showing a strong commitment to act promptly on all critical aspects of their economic reform program supported by the IMF, the global lender said.

Egypt’s international and regional partners will play a critical role in facilitating the implementation of the authorities’ policies and reforms. In this context, the recent investment deal in Ras ElHekma alleviates the near-term financing pressures, it added.

Egypt hikes interest rate 

On the flip side, Egypt has implemented its biggest-ever interest-rate hike and allowed its currency to weaken more than 38% in a long-awaited devaluation, Bloomberg reported.

The series of moves included a 600 basis-point rate increase and came after Cairo struck a $35 billion deal late last month with the United Arab Emirates. A dire shortage of foreign exchange has until now hammered businesses and caused the cost of imported goods to soar. The Israel-Hamas war has added to economic pressures.

According to a report by The New Arab, the Egyptian economy has long been impacted by the divide between the official value of foreign currency and how it is worth in the parallel market.


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