The International Monetary Fund’s executive board has approved a deal with Egypt to increase its bailout credit from $3 billion to $8 billion, in an effort to bolster the Arab country’s economy.
In a statement issued late Friday, the board said its decision would allow Egypt to receive around $820 million as part of the arrangement agreed earlier this month.
Egypt reached an agreement with the IMF on a reform plan that includes floating the local currency, lowering public investment, and allowing the private sector to become the engine of growth, according to the statement.
Egypt has already floated the pound and sharply increased the main interest rate. Commercial banks are now trading the U.S. currency at more than 47 pounds, up from about 31 pounds. The measures are meant to combat ballooning inflation and attract foreign investment.
The Egyptian economy has been hit hard by years of government austerity, the coronavirus pandemic, the fallout from Russia’s full-scale invasion of Ukraine, and most recently, the Israel-Hamas war in Gaza.
The IMF stated that such external shocks, combined with delayed reforms, have negatively impacted economic activity.
Growth slowed to 3.8% in the fiscal year 2022-23 due to weak confidence and foreign currency shortages, and is projected to slow further to 3% in the fiscal year 2023-24 before recovering to about 4½ percent in 2024-25, the IMF statement said.
The annual inflation rate was 36% in February, but is expected to ease over the medium term, the IMF said.
The currency devaluation and interest rate hike have inflicted further pain on Egyptians already struggling with skyrocketing prices over the past years. Nearly 30% of Egyptians live in poverty, according to official figures.
Egypt also this month signed a deal with the European Union that includes a 7.4 billion-euro ($8 billion) aid package for the most populous Arab country over three years.
