IMF authorizes $3 billion in support for Egypt
The agreement intends to lower public debt and improve residents' access to social safety nets.
The International Monetary Fund has approved a deal that will give cash-strapped Egypt a $3 billion support package over roughly four years. The pact is anticipated to bring in an additional $14 billion in finance for the nation.
According to a report from the Egyptian cabinet released on Saturday, the assistance package, known as an Extended Fund Facility Arrangement, will boost the social security system for citizens rather than requiring the Egyptian government to reduce spending on subsidies.
Following the coronavirus outbreak and the war in Ukraine, increasing oil and food costs have had a significant negative impact on Egypt's economy, with the Egyptian pound losing 36% of its value versus the dollar since March.
According to government statistics, around a third of Egypt's 104 million citizens live in poverty. Many Egyptians rely on the government to maintain essential products cheap through state subsidies and other comparable programs.
The 46-month package will offer the Egyptian government immediate access to around $347 million, which will help the heavily indebted country strengthen its budget and balance of payments, according to an IMF statement.
Along with enacting significant economic reforms like a "durable move to a flexible exchange rate system" and a "monetary policy aimed at progressively decreasing inflation," it also hopes to "catalyze additional financing of around $14 billion from Egypt's international and regional partners".
The declaration follows a preliminary agreement between Egypt and the fund that was struck in October as a result of changes by Egypt's central bank, which included an increase in significant interest rates of around 2 percentage points.
The IMF stated in a background report on Egypt that Cairo had received $5 billion in additional financing for the fiscal year that ends in June 2023, and that the new program would help close some of the country's foreign currency financing shortfall.
Separate from the rollover of Gulf state deposits in Egypt's central bank, $2 billion of that sum would come from the sale of equity in private enterprises and $3 billion from multilateral help.
The IMF stated that the goals of the program were to assist government initiatives to lessen the role of the state in the economy, promote SOE transparency, and level the playing field for all economic actors.
Due to the significant economic influence of the state and military as well as the advantages SOEs enjoy over private sector businesses, Egypt has had difficulty attracting investment.
The IMF said that the Egyptian government also promised to provide information on fiscal account audit reports, procurement contracts for more than 20 million Egyptian pounds ($811,380), and an annual report on tax advantages, exemptions, and incentives.
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