Egypt, IMF set to sign deal on loan program augmentation ‘within hours’: High-level source

CAIRO – 6 March 2024: The Egyptian government and the International Monetary Fund (IMF) are on the verge of signing an agreement to augment the Egyptian loan program within a few hours, Al Qahera News reported, citing a high-level source.

This agreement is expected to bolster the economic reform program and increase foreign liquidity inflows into the local market, the source said.

In a significant move, Egypt devalued its currency on Wednesday, resulting in a decrease in the value of the Egyptian pound to around 48 per dollar by midday, compared to the maintained rate of around 30.9 over the past year.

Earlier today, the Central Bank of Egypt (CBE) raised interest rates by 600 basis points, reaching 27.25%. The CBE also highlighted the significance of unifying the nation's exchange rates.

Moody's, a global credit rating agency, has anticipated that the IMF will enhance Egypt's loan program to $10 billion.

The IMF has cited the need for the new package to support Egypt in the face of economic challenges arising from global circumstances, including the ongoing impact of the war in Gaza on Egypt.

An IMF delegation visiting Egypt a month ago said both parties have reached “excellent progress” regarding the finalization of the first and second reviews of the country’s current reform programme.

Pleased to meet with Mostafa Madbouly, 🇪🇬’s Prime Minister. Working with Egypt is a high priority for the IMF and we have made significant progress in our discussions of a comprehensive policy package needed to complete the 1st & 2nd reviews of Egypt’s economic reform program. pic.twitter.com/suJ0g7dL4L

— Kristalina Georgieva (@KGeorgieva) February 12, 2024

The devaluation of the Egyptian currency brings an end to months of speculation regarding the timing of Egypt's currency devaluation.

The move was prompted by a considerable disparity between the official exchange rate of the Egyptian pound against the US dollar and its price in the parallel market.

The devaluation follows Egypt's recent signing of a colossal $35 billion agreement with the Abu Dhabi Developmental Holding Company, representing the largest foreign direct investment in the country's history.

This investment is crucial amid a foreign currency shortage that Egypt has been grappling with over the past two years.

The Egyptian government expects the project to attract $150 billion in investments from the United Arab Emirates during its development period.

The impending agreement between Egypt and the IMF is anticipated to support Egypt’s economic journey as it seeks to implement reforms, address challenges, and secure the necessary financial support to foster economic stability and growth.