Egypt has secured a preliminary agreement with the International Monetary Fund (IMF) that should help unlock the next disbursement of the North African nation’s $8 billion loan.
The staff-level agreement, which must still receive approval from the IMF’s executive board, will grant Egypt access to approximately $820 million, the IMF announced on Thursday.
The agreement follows an IMF mission’s visit to Cairo from May 12 to 26, with ongoing virtual meetings between Egyptian officials and IMF economists continuing until recently.
This new tranche of funds comes as a result of Egypt’s commitment to implement a series of policies and reforms necessary to complete the third review of its loan, initially agreed upon in December 2022.
The IMF’s statement highlighted Egypt’s efforts to restore macroeconomic stability, noting that these efforts have begun to improve economic conditions despite a challenging regional environment.
According to the IMF, maintaining tight monetary conditions is essential in the short term to curb inflation, and a flexible exchange rate remains a crucial element of Egypt’s economic strategy.
Egypt’s pact with the IMF was initially valued at $3 billion in March but has since more than doubled to $8 billion.
This increase comes as the country contends with the economic fallout from the ongoing war in neighboring Gaza and a decrease in Suez Canal revenues due to rebel attacks on shipping routes in the Red Sea off the coast of Yemen.
As part of its economic reforms, Egypt recently raised the price of subsidized bread for the first time in decades.
This move is part of a broader strategy by Egyptian officials to gradually reduce state subsidies on essential services, including fuel and electricity.
Historically, bread subsidies have been a sensitive issue in Egypt; a similar price increase led to riots in the late 1970s, forcing then-President Anwar Sadat to retract the decision.
The IMF emphasized the necessity of these reforms, acknowledging that while they are challenging, they are crucial for long-term economic stability.
“Egypt’s steps towards economic reform are vital for ensuring sustainable growth and stability,” the IMF said in its statement.
Egyptian officials have expressed optimism about the agreement, viewing it as a positive step towards stabilizing the nation’s economy.
“This agreement with the IMF is a testament to our commitment to economic reform and stability,” said Finance Minister Mohamed Maait. “The disbursement of these funds will support our ongoing efforts to improve economic conditions and foster sustainable growth.”
The next steps include securing the IMF board’s approval for the agreement, after which Egypt will receive the $820 million disbursement.
This financial support is expected to provide a much-needed boost to Egypt’s economy, helping to mitigate the impacts of regional conflicts and economic challenges.
As Egypt continues to navigate these turbulent economic waters, the IMF’s support remains a critical component of its strategy to achieve long-term stability and growth.
The upcoming months will be crucial in determining the effectiveness of these reforms and the overall trajectory of Egypt’s economic recovery.