An announcement made by the International Monetary Fund on Friday revealed the immediate disbursement of $820 million to the Egyptian government as a component of an expanded plan to support the nation’s struggling economy.
The payment validation by the IMF’s Executive Board is part of a $3 billion aid initiative that was initially approved at the conclusion of 2022.
The long-anticipated action by the IMF, which had been repeatedly delayed, comes at a time when the Egyptian economy is facing escalating challenges.
Furthermore, the Board has also sanctioned an additional $5 billion extension which was announced earlier in the month, escalating the total amount of funding provided by the Fund to Egypt to $8 billion.
In a press release sent to AFP on Friday, the IMF stated that the Egyptian government has successfully met all the set objectives from the initial two phases of the aid program, except for the target level of foreign currency reserves.
“The authorities have notably bolstered the reform agenda,” remarked IMF Managing Director Kristalina Georgieva in the statement.
“Recent initiatives aimed at rectifying macroeconomic imbalances such as the unification of the exchange rate, coupled with significant tightening of monetary and fiscal policies, represent challenging yet pivotal strides forward,” she added.
This month saw the Central Bank of Egypt hike interest rates by six percentage points to 27.75 percent in a bid to tackle inflation and narrow the gap between the official exchange rate and the black market rate, leading to a 40% drop in the value of the Egyptian pound in a single day, following a 50% decline over the previous few months.
Approximately two-thirds of Egypt’s 106 million inhabitants reside below or slightly above the poverty line, with the nation grappling with declining foreign currency earnings from sectors like tourism – which has been impacted by the pandemic, conflicts in Ukraine and the Gaza Strip – as well as issues along the Suez Canal.
The IMF highlighted that assaults by Yemen’s Huthi rebels in the Red Sea and Gulf of Aden have caused a 40-50% reduction in dollar earnings from the canal since the beginning of the current year, a vital conduit for global trade.
Since assuming office in 2013, President Abdel Fattah al-Sisi has initiated a series of large-scale projects that, according to economists, have not yielded increased revenues but have severely constrained the state’s financial capabilities.
Between 2013 and 2022, Egypt’s foreign debt surged from $46 billion to over $165 billion according to World Bank figures, placing it as the second most vulnerable country to default after war-torn Ukraine.
Nonetheless, the IMF holds a relatively positive outlook for the forthcoming fiscal period, predicting a 4.4% growth in economic output compared to the 3% growth expected for the ongoing fiscal year ending on June 30th.
AFP