The deal underscores Egypt’s role as a Middle East stalwart that’s too big to fail. — Bloomberg
Cairo: Egypt and the International Monetary Fund (IMF) agreed to more than double the country’s rescue programme to US$8bil, the culmination of international efforts to stabilise a cash-strapped regional linchpin squeezed by wars and inflation.
The deal followed swift moves earlier Wednesday to float the currency – sending the pound as much as 38% lower – and hike interest rates by a record 600 basis points as Egypt, led by President Abdel-Fattah El-Sisi, has sought to meet longstanding demands from the IMF that have also been backed by the United States.
The deal underscores Egypt’s role as a Middle East stalwart that’s too big to fail, particularly amid Israel’s war with Hamas on its border and another conflict raging in neighboring Sudan. It also follows a surprise US$35bil investment commitment from the United Arab Emirates.
The IMF expects announcements soon on additional aid from “key partners”, the fund’s mission chief to the North African nation, Ivanna Vladkova Hollar, said in a briefing when asked about loans from its sister institution, the World Bank.
She said at a separate earlier event that Egypt also reached a staff-level agreement with the IMF on its two delayed programme reviews.
Egypt, already the IMF’s second-biggest borrower after Argentina, expects to get access to around US$1.2bil in additional financing from the lender, Prime Minister Mostafa Madbouly said at the same event.
Key economic reforms of Egypt’s programme include “a move to a flexible exchange rate system, tightening of monetary and fiscal policies, and a slowdown in infrastructure spending,” the IMF said in a statement Wednesday.
This can help “reduce inflation, and preserve debt sustainability, while fostering an environment that enables private-sector activity”,” said the lender. — Bloomberg
