10 things you need to know about Egypt new IMF loan
The IMF just approved this past Friday a $3 billion loan to Egypt and here is eveything you need to know about it,
1. The fund is given by the IMF's Extended Fund Facility (EFF) which is the same facility that gave Egypt the $12 billion loan of 2016. The EFF focuses on currency devaluations and encouraging the private sector in order to reverse cases of budget imbalance.
2. The loan is for $3 billion, over the period of 46 months, which means the deal will last till the fiscal year 2025/2026. The decision included the Egypt getting $347 million immediately, representing the 1st tranche of the loan.
3. The devaluation of the Egyptian pound means that the exchange rates will be flexible, and this will protect the foreign currency reserves of the Central Bank, as well as help the economy be resilient to shocks.
4. Having a flexible exchange rate eliminates the possibility of big changes in value, which means more solid trade agreements and easier, more attractive investments.
5. The debt has several measures to protect vulnerable segments of the society and boost the social spending and maintaining economic stability. It looks at maintaining a healthy public debt to GDP ratio.
6. An example of social spending is programs like Takaful and Karama and the universal health insurance programe as well as Covid19 vaccines,ration cards and other social support schemes that Egypt aims to improve and increase spending.
7. The reform program that comes with the debt also works on decreasing inflation rates to hover around 7% without the burden of subsidation.
8. The debt also comes with a program to empower the private sector and lower the influence of state-owned businesses. This includes facilitating procedures and investments for private sector and encouraging competition.
9. The EFF will also help Egypt get $14 billion from its international partners, like gulf countries. Egypt also asked for $1 billion to achieve its climate goals.
10. This is the 12th deal Egypt has made with IMF since it joined in 1945, and the 3rd since 2020. The loans since 2016 amount to $30 billion.