Egypt is in dire financial straits, but according to an agreement reached by the International Monetary Fund (IMF), the country will receive a $3 billion aid package over roughly four years.
An Egyptian cabinet report published on Saturday stated that the social protection network would be strengthened without the government’s need to reduce subsidies spending, thanks to the support package unveiled late on Friday, known as an Extended Fund Facility Arrangement.
Since March, the Egyptian pound has lost 36 percent of its value against the U.S. dollar due to increasing oil and food prices caused by the coronavirus outbreak and the war in Ukraine.
According to official statistics, one-third of Egypt’s 104 million people are poor, and many Egyptians rely on state subsidies and other similar programs to keep the cost of necessities low.
Immediately available to the Egyptian government, the package totals over $347m and spans 46 months, according to an IMF statement. This would help the debt-ridden country strengthen its balance of payments and budget.
It seeks to implement broad economic reforms, such as a “durable move to a flexible exchange rate system” and a “monetary policy targeted at progressively decreasing inflation,” and “catalyze additional financing of around $14 billion from Egypt’s foreign and regional partners.”
Following changes by Egypt’s central bank, which included raising key interest rates by around two percentage points, a preliminary agreement was reached between Egypt and the fund in October, prompting the announcement.
According to an IMF background document on Egypt, Cairo has received $5bn in new financing for the fiscal year ending in June 2023, which also states that the new program will pay some of the country’s foreign currency financing shortfall.
Aside from the rollover of deposits by Gulf states in Egypt’s central bank, the other sources of this sum are the sale of equity in private sector enterprises (at the cost of $2 billion) and multilateral help (at the cost of $3 billion).
According to the IMF, their program will help the government implement its goals to shrink the role of the government in the economy, improve the accountability of SOEs, and level the playing field for businesses.
Due to the government’s and military’s heavy hand in the economy and the advantages given to state-owned enterprises (SOEs) over private businesses, Egypt has had a hard time attracting investment.
Moreover, the Egyptian government has promised to release information such as audit reports on fiscal accounts, procurement contracts for more than 20 million Egyptian pounds ($811,380), and an annual report on tax cuts, exemptions, and incentives, as stated by the IMF.
