CAIRO - 6 March 2024: The International Monetary Fund (IMF) and Egyptian authorities have achieved a staff-level agreement on a set of policies and reforms required to complete the first and second reviews under the Extended Fund Facility (EFF) arrangement.
The IMF loan has been augmented and increased to $8 billion instead of $3 billion "due to significant macroeconomic challenges that have become more complex to manage with the impact of the recent conflict in Gaza on tourism and Suez Canal receipts," according to the IMF statement.
"The authorities have demonstrated a strong commitment to promptly address all critical aspects of their economic reform program, which is supported by the IMF. Policy discussions and program reforms have focused on six pillars," said Ivanna Vladkova Hollar, the IMF mission Chief.
The six pillars of the reform program include transitioning towards a credible flexible exchange rate regime, implementing tighter monetary policy to reduce inflation and reverse dollarization, pursuing fiscal consolidation to maintain debt sustainability, slowing down infrastructure spending, ensuring sufficient social spending for vulnerable groups, and implementing reforms in state ownership policies to foster private sector growth.
On Wednesday, Prime Minister Mostafa Madbouly announced the signing of the agreement between Egypt and the IMF during a press conference.
Madbouly also revealed during the press conference that Egypt will receive $12 billion in soft loans from the World Bank and the European Union.
The announcement came hours after the Central Bank of Egypt's decision to float the Egyptian pound (EGP) and increase interest rates by 600 basis points.
The CBE raised the overnight deposit rate, the overnight lending rate, and the rate of the main operation by 600 basis points to reach 27.25 percent, 28.25 percent, and 27.75 percent, respectively. Additionally, the discount rate has been raised by 600 basis points to 27.75 percent.
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