Egypt secures expanded $8bn IMF rescue deal

March 06, 2024 (MLN): Egypt agreed with the International Monetary Fund on more than doubling its rescue program to $8 billion, the culmination of efforts that included a massive devaluation and an interest-rate hike earlier on Wednesday, Bloomberg reported.

The country also reached a staff-level agreement with the Washington-based lender on two delayed program reviews, the fund’s mission chief to the North African nation, Ivanna Vladkova Hollar, said at a news conference in Cairo.

Egypt expects to get access to around $1.2bn in additional financing from the IMF, Prime Minister Mostafa Madbouly said at the same event.

The deal is a boost for the cash-strapped nation that’s been struggling with its worst foreign-currency crunch in decades.

It followed decisions by the central bank including a pledge to allow the market to determine the exchange rate, in an attempt to meet longstanding demands from the IMF that have held up negotiations.

Little has so far been disbursed from the initial $3bn loan Egypt secured more than a year ago.

The IMF waited to see if authorities would allow greater flexibility in the exchange rate and make good on other promises, before completing the reviews and handing over the funds.

The announcements follow the pound’s devaluation by more than 38% and the central bank’s 600 basis-point rate hike at an unscheduled meeting.

The series of moves came after Cairo struck a $35bn deal late last month with the United Arab Emirates.

The foreign exchange squeeze has hammered businesses and caused the cost of imported goods to soar. The Israel-Hamas war has added to economic pressures.

The devaluation may stoke more inflation, it’s already more than 35%, and hurt Egyptians in the short term.

But President Abdel-Fattah El-Sisi and his officials are banking on the reforms attracting foreign investors back to the country of 105 million people, whose stability is seen as crucial for the wider Middle East, and ending its worst economic crisis in decades.

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