The Egyptian government will receive an immediate $820 million payment from the International Monetary Fund on Friday as part of an expanded strategy to support the country’s faltering economy.
The payment was approved by the IMF Executive Board as a component of a $3 billion aid package that was awarded at the end of 2022.
The Egyptian government has been waiting impatiently for the IMF move, which comes at a time when the country’s economic problems are getting worse.
The Fund has now loaned $8 billion to Egypt overall after the Board authorized a $5 billion extension that was announced at the beginning of the month.
In a news release, the IMF said that the Egyptian government has achieved all the objectives set out in the first two stages of the aid program, with the exception of the level of its foreign currency reserves.
“The authorities have significantly strengthened the reform package,” IMF Managing Director Kristalina Georgieva said in the release.
“Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate… and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward,” she added.
The Egyptian pound fell 40 percent in a single day after falling 50 percent over the previous few months when Egypt’s central bank hiked interest rates earlier this month by six percentage points to 27.75 percent in an effort to fight inflation and move the official exchange rate closer to the black market rate.
The poverty rate in Egypt is close to two thirds, with 106 million people living at or near the national average. The nation is also seeing a decline in foreign exchange profits due to issues with the Suez Canal and tourism, which has been negatively impacted by the pandemic, the war in Ukraine, and the ongoing conflict in Gaza.
Attacks by Yemen’s Huthi rebels in the Red Sea and Gulf of Aden have reduced dollar revenues from the canal, a crucial passage for world trade, by 40-50 percent since the start of the year, the IMF said.
President Abdel Fattah al-Sisi has undertaken a number of massive projects since assuming office in 2013, which experts say have not increased revenue but have significantly strained the state’s financial resources.
According to World Bank data, Egypt’s foreign debt increased from $46 billion to over $165 billion between 2013 and 2022, placing it second most vulnerable to default after war-torn Ukraine.
The IMF, however, is predicting 4.4 percent economic growth in the upcoming fiscal year, up from 3 percent in the current fiscal year that ends on June 30. This is a rather bullish outlook.
