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IMF ties Egypt loan disbursements to currency flexibility

Egypt, which signed the loan agreement on 6 March, will have immediate access to US$820 million this week and another US$820 million after a review to be completed by the end of June

The IMF will tie payments to Egypt under an US$8 billion financial programme to Cairo’s letting market conditions determine the price of its currency and its making foreign exchange available to businesses and private individuals, the IMF said on Monday.

Egypt, which signed the loan agreement on 6 March, will have immediate access to US$820 million this week and another US$820 million after a review to be completed by the end of June.

Subsequent reviews will be made every six months, with each unlocking payments of US$1.3 billion provided certain conditions are met, with the last payment in autumn of 2026, mission chief Ivanna Vladkova Hollar told a news conference.

The International Monetary Fund’s executive board approved the programme on Friday, expanding on a US$3 billion Extended Fund Facility signed in December 2022 after the crisis in neighbouring Gaza further shook Egypt’s already precarious economy.

Egypt allowed its currency to weaken sharply after the 2022 agreement, but within months had re-pegged it to the dollar, prompting the IMF to put the programme on hold.

Under last month’s agreement Egypt again let its currency plunge and has since let its price fluctuate.
“This is an important reform that needs to be sustained. It’s not a one-off reform,” Hollar said.

“At each individual review, the expectation is that the conditions that we’re seeing now in the market are going to continue to hold, in the sense that we do not see a return to a system of FX rationing and lack of FX availability,” she said.

The Gaza crisis exacerbated Egypt’s chronic foreign crisis by slowing tourism growth and triggering attacks from Yemen on shipping in the Red Sea, halving Suez Canal revenue.

Tourism and canal revenue are two of its main sources of foreign exchange.

Among other reforms the IMF is seeking is that Egypt ensure a level playing field between private and state firms and that the state reduce its role in the economy.

 

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Source
Reuters
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