IMF approves $3 billion support package for Egypt

The agreement aims to reduce government debt and strengthen the social safety net for citizens.

The International Monetary Fund approved a deal that will provide a $3 billion support package to cash-strapped Egypt for nearly four years, with the deal expected to attract an additional $14 billion in financing for the country.

The support package announced late Friday, known as the Expanded Fund Agreement, will not require the Egyptian government to cut spending on subsidies, but will strengthen the social safety net for citizens, according to an Egyptian cabinet report released on Saturday. .

Egypt’s economy has been hit hard by rising oil and food prices following the coronavirus pandemic and the war in Ukraine, with the Egyptian pound losing 36 percent of its value against the dollar since March.

About a third of Egypt’s 104 million people live in poverty, according to government figures, and many Egyptians rely on the government to keep basic goods affordable through state subsidies and other similar schemes.

The package covers a 46-month period and will give the Egyptian government immediate access to some $347 million, which will help the indebted nation bolster its balance of payments and budget, the IMF said in a statement.

It also aims to “catalyze additional funding of some $14 billion from Egypt’s international and regional partners” and introduce sweeping economic reforms, including a “lasting shift to a flexible exchange rate regime” and “monetary policy aimed at gradually reduce inflation. .

The announcement comes after a preliminary agreement was reached in October between Egypt and the fund, following reforms by Egypt’s central bank that included raising key interest rates by about 2 percentage points.

In a background paper on Egypt, the IMF said the new program would finance part of the country’s foreign currency financing gap and that Cairo had secured $5 billion in new financing for the fiscal year ending June 2023.

Of that, $2 billion would come from the sale of shares in private sector companies and $3 billion from multilateral support, apart from the transfer of deposits from Gulf states at Egypt’s central bank.

The IMF said its program was aimed at supporting the authorities’ plans to reduce the state’s footprint in the economy, increase transparency around state-owned enterprises (SOEs), and create a level playing field for all economic players.

Egypt has had difficulties attracting investment due to the prominent role of the state and the military in the economy and the advantages given to state-owned companies over private sector companies.

The Egyptian authorities also pledged to publish data including audit reports on tax accounts, procurement contracts for more than 20 million Egyptian pounds ($811,380) and an annual report on tax exemptions, exemptions and incentives, the IMF added.