Prime Minister Mostafa Madbouly announced that Egypt signed an agreement on Wednesday with the International Monetary Fund (IMF) to increase the value of the country’s funding from three billion to eight billion dollars.
An agreement was also settled with IMF experts regarding the first and second reviews under the IMF’s Extended Fund Facility (EFF), following efforts by the government that included a sharp devaluation of the currency and an increase in interest rates.
The move comes hours after the Central Bank of Egypt (CBE) allowed the pound to devalue for the first time in more than 14 months against the US dollar, following the surprise move to raise interest rates by 600 basis points on Wednesday.
The Prime Minister pointed out that after signing the agreement with the IMF, Egypt can then apply to the IMF’s Environmental Sustainability Fund for a loan of about $1.2 billion – bringing the total loan provided by the fund after signing to $9.2 billion.
He pointed out that after the signing, the remaining international partners – including the World Bank and the International Union – will provide soft loans to Egypt under an integrated program allowing the government to attain monetary stability.
The head of the IMF mission to Egypt Ivana Vladkova Holer, clarified during a press conference held on Wednesday that the IMF’s financial package aims to preserve sustainability and the exchange rate system in Egypt.
Egypt has expressed its “strong” commitment to working quickly on the reform aspects supported by the fund, Holer noted.
She added that Egypt’s authorities have taken “decisive” steps to move towards a flexible exchange rate system by unifying the official exchange rate with the parallel market.
The flexible exchange rate system will support Egypt handle external shocks and help the government curb inflation over time, she explained, adding that the decision to tighten monetary policy by 600 basis points is “welcome” after the 200 basis point interest rate hike at the beginning of the year.
