The International Monetary Fund (IMF) announced on Friday the immediate disbursement of $820 million to the Egyptian government. This disbursement is part of an augmented plan aimed at providing vital support to the nation’s economic recovery efforts.
The IMF’s Executive Board validated the payment as part of a $3 billion aid program that was initially granted at the end of 2022. Additionally, the Board approved a $5 billion extension earlier this month, bringing the total lending to Egypt from the Fund to $8 billion. The disbursement, eagerly awaited by the Egyptian government, comes at a time of mounting economic challenges for the country.
In a news release sent to AFP on Friday, the IMF highlighted the Egyptian government’s progress in meeting the objectives set out in the first two stages of the aid program. IMF Managing Director Kristalina Georgieva praised the authorities for significantly strengthening the reform package, noting that recent measures aimed at correcting macroeconomic imbalances were crucial steps forward.
These measures include the unification of the exchange rate and significant tightening of monetary and fiscal policies, which were implemented despite their difficulty. Earlier this month, Egypt’s central bank raised interest rates by six percentage points to 27.75 percent in a bid to combat inflation and align the official exchange rate with the black market rate. This move caused the Egyptian pound to plunge 40 percent in one day, following a 50 percent fall over the last few months.
Egypt’s economic challenges are compounded by various factors, including a drop in foreign currency earnings from tourism, which has been severely impacted by the COVID-19 pandemic and subsequent conflicts in Ukraine and the Gaza Strip. Moreover, disruptions along the Suez Canal, a crucial passage for world trade, have further reduced dollar revenues, with attacks by Yemen’s Huthi rebels in the Red Sea and Gulf of Aden leading to a significant decline since the start of the year.
President Abdel Fattah al-Sisi’s ambitious megaprojects, initiated since taking power in 2013, have faced scrutiny from economists who argue that they have not generated sufficient revenues while limiting the state’s financial capacity. Egypt’s foreign debt has soared from $46 billion to over $165 billion between 2013 and 2022, according to World Bank data, making it the second country most at risk of default behind war-torn Ukraine.
Despite these challenges, the IMF remains optimistic about Egypt’s economic prospects for the coming fiscal year. The Fund forecasts economic growth to rise to 4.4 percent, compared to 3 percent for the current fiscal year ending on June 30. This outlook underscores the importance of ongoing reforms and international support in ensuring Egypt’s economic stability and growth trajectory.
The immediate disbursement of funds by the IMF reflects the international community’s commitment to assisting Egypt in overcoming its economic challenges and fostering sustainable development. As Egypt continues its reform efforts, stakeholders will closely monitor progress and work towards achieving long-term economic resilience and prosperity for the country and its people.
