IMF Greenlights $820 Million Bailout Package for Egypt’s Ailing Economy
Written by Deborah Oyinloye on March 30, 2024
The International Monetary Fund (IMF) has given the green light for the immediate disbursement of $820 million to Egypt, marking a pivotal moment in the country’s efforts to stabilize its faltering economy.
This disbursement is part of a larger $3 billion aid program initially approved by the IMF’s Executive Board at the end of 2022. Additionally, the Board has sanctioned a $5 billion extension, announced earlier this month, elevating the total IMF lending to Egypt to a staggering $8 billion.
The eagerly anticipated IMF action comes at a critical juncture for Egypt, which has been grappling with mounting economic challenges. In a statement released to AFP on Friday, the IMF acknowledged Egypt’s progress in meeting the objectives of the initial stages of the aid program, except for foreign currency reserves.
IMF Managing Director Kristalina Georgieva commended Egypt’s reform efforts, stating, “The authorities have significantly strengthened the reform package. Recent measures towards correcting macroeconomic imbalances, including the unification of the exchange rate and substantial tightening of monetary and fiscal policies, were difficult but crucial steps forward.”
Earlier this month, Egypt’s central bank implemented a significant rate hike, raising rates by six percentage points to 27.75% in a bid to combat inflation and align the official exchange rate with the black market rate. This move resulted in a sharp 40% decline in the Egyptian pound’s value in a single day, following a 50% depreciation over recent months.
Egypt’s economic challenges are further exacerbated by a decline in foreign currency earnings, stemming from various factors such as the pandemic, the war in Ukraine, and conflicts in the Gaza Strip. Additionally, disruptions caused by Yemen’s Huthi rebels in the Red Sea and the Gulf of Aden have led to a 40-50% reduction in dollar revenues from the Suez Canal, a vital conduit for global trade, since the beginning of the year, as reported by the IMF.
President Abdel Fattah al-Sisi’s ambitious megaprojects, initiated in 2013, have been met with scepticism from economists who argue that these projects have not generated sufficient revenues while constraining the state’s financial resources. According to World Bank data, Egypt’s foreign debt surged from $46 billion in 2013 to over $165 billion by 2022, ranking it as the second most at-risk country of default, trailing only war-ravaged Ukraine.
Despite the current challenges, the IMF remains cautiously optimistic about Egypt’s economic prospects for the upcoming fiscal year, projecting a growth rate of 4.4%, compared to the 3% growth expected for the current fiscal year ending on June 30.
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Author: Deborah Oyinloye
With an interest in media, Deborah aims to impart the lives of people positively.
Grace Essien On April 1, 2024 at 8:10 am
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